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What is Professional Tax?

The tax imposed by the government at the state level in India is known as Professional tax. Those persons who are engaged in the profession such as Doctor, Company Secretary, Lawyer, Cost Accountant, Chartered Accountant or Merchant/Business persons and earning income from these professions are responsible for paying professional taxes in few states of India.

Out of 28 states and 9 union territories, the professional tax is imposed by the following: Tamil Nadu, Karnataka, Andhra Pradesh, Bihar, Assam, Maharashtra, Telangana, Jharkhand, Manipur, Mizoram, Kerala, Meghalaya, Gujarat, Madhya Pradesh, Odisha, Tripura, Sikkim, West Bengal, Puducherry and Chhattisgarh. Individuals, merchants and business persons need to pay the Professional tax.

The Professional tax is imposed by Municipal authority or corporation of some union territories in India. Every eligible person needs to pay professional tax every month to the state government. Private company employees or professionals who are earning salary every month also need to pay this tax.

History of Professional Tax

This tax was started in 1949 and it is charged in some of the states of India under article 276(2) of the Indian constitution. The professional tax is imposed on the income earned from employment, calling, trade and profession and it is charged by the state government.

Purpose of Professional Tax

According to Article 276 of the Indian constitution, Professional tax is levied on employment, calling, trade and profession. Any individual involved in any employment/calling/trade/profession and belongs to a certain class as per specified in the schedule of the article is liable to pay professional tax to the state government at a pre-defined rate.

Professional Tax Slabs in India

The professional tax slab for some of the states are listed below –

States Salary Approx Tax deducted (per month)

Maharashtra

10000 & above (Monthly)

Rs. 200

Karnataka

More than 15000 (Monthly)

Rs. 200

West Bengal

More than 40000 (Monthly)

Rs. 200

Tamil Nadu

75001 & above(Half-yearly)

Rs. 1095

Gujarat

12000 & above (Monthly)

Rs. 200

Madhya Pradesh

1.8 Lakh & above (Annually)

Rs. 212

Andhra Pradesh

Above 20000 (Monthly)

Rs. 200

Odisha

Above 20000 (Monthly)

Rs. 200

Applicability of Professional tax

There are certain rules you need to follow in relation to applicability of professional tax –

  • There are two types of professional tax certificates issued by the state authority. One is professional tax registration certificate which is required by the individual to perform role as an employer, the other one is professional tax enrolment certificate required by the company to deduct professional tax from the salaries of employees.
  • The certificate of enrolment should be obtained by the company within 30 days from the date of becoming eligible to pay professional tax.
  • If the employer holding “Certificate of enrolment” does not deposit the professional tax of their employees before the due date, he or she can be penalized by the state government.
  • Foreign employees are not liable to pay professional tax in such companies.
  • Every office of the company should submit a separate application as per the requirements of that particular state.
  • However, the rules applicable for professionals are also applicable on Indians employed by a foreign diplomatic offices or consulates as these offices are not provided with certificate of registration.

Deduction of Professional Tax

The professional tax is calculated on the total gross salary of the working professional. The maximum amount annually deducted from the salary of an employee is Rs. 2500. If the working professional is a partner or director of an organization, then the professional tax is deducted after calculation of the company’s gross turnover or clearance of director or partner’s salary. The management of the company is responsible for carry forwarding the professional tax collection amount to the state authority. It is mandatory for each and every employee to mention the professional tax amount in his or her income tax return.

Submission of Professional Tax

The businesses and companies who come under State government jurisdiction are responsible for paying professional tax. The professional tax needs to be submitted to the treasury of the State government via Bank challan. There are some places selected by state authorities where employers can easily pay the professional tax.

Employers need to understand that if they employ more than 20 employees within the organization, they need to submit the total amount of professional tax within 15 days after the end of the previous month to the state authority whereas If they employ less than 20 employees, they need to pay the professional tax every quarter within 15 days after the end of every quarter.

Penalty for Non-Payment and filing of incorrect information in Professional Tax

If you are not able to pay the professional tax within the stipulated schedule and the time period, then penalty is imposed by the state authority on the employer or the employee. You need to pay 2% penalty every month for the delay until you will not make the payment for the same. 10% additional penalty is also levied in some cases.

In addition to it, you need to pay at a rate of Rs.2 per day in case there is a delay in obtaining “enrolment certificate” and penalty will be 3 times of the tax amount due, if the information filled by you at the time of enrolment is found false or incorrect. Even in some states, penalty amount is Rs.300 for every late return filed.

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