Professional Tax: All You Need to Know
That tax which is imposed at the state level in India is known as Professional tax. Those persons who are engage in the profession such as Doctor, Company Secretary, Lawyer, Cost Accountant, Chartered Accountant or Merchant/Business persons and earn money via these professions are responsible for paying professional taxes in few states in India.
Out of the 7 union territories and 29 states, those states which presently levied professional tax in a country like India are Tamil Nadu, Karnataka, Andhra Pradesh, Bihar, Assam, Maharashtra, Telangana, Kerela, Meghalaya, Gujarat, Madhya Pradesh, Odisha, Tripura, Sikkim and West Bengal. Merchants, individual workers and business persons also need to pay the Professional tax.
Municipal authority or corporation of some union territories and states impose Professional tax in India. This tax is required to pay every month and imposed via certain tax slabs. Private company employees or those professionals who earn salary every month need to pay this tax as well.
Purpose of Professional Tax
According to the Indian constitution, Article 276, Professional tax needs to be levied as a tax on employments, callings, trades and professions. Every person who is doing any employment/calling/trade/profession and belongs to a certain class, given in the schedule of the article and is a party liable to pay professional tax to some state governments at a pre-defined rate given in the schedule of the article.
Amount of Professional Tax
The structure of the professional tax is based on slabs and it is calculated on the basis of total gross salary of the working professional, or an employee who earns salary every month needs to pay professional tax. This tax is deducted every month from the salary of every employee.
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 and the director or partner’s salary is cleared. In the West Bengal, professional tax payment is not calculated on the basis of the turnover of the employee’s company.
Deduction of Professional Tax
The management of a company or an organization is liable for the professional tax deduction from the salaries of their employees. The company or the management of the company is responsible for carry forwarding the professional tax collection amount to the department or the concerned authority of the government.
Each employee needs to mention the amount of professional tax deduction from his salary in their return of income tax and this is necessary.
Submission of Professional Tax
The businesses and companies who come under State government jurisdiction are responsible for paying the professional tax. The professional tax needs to be submitted to the treasury of the State government via the Bank challan. Concerned authorities select some places where employers need to pay the professional tax.
Employers need to understand that if they employ more than 20 employees, then they need to submit professional tax collection amount within 15 days after the end of the previous month. If the employer employs employees less than 20, then they are required to pay the professional tax every quarter within 15 days after every quarter end.
Non-Payment of Professional Tax
If you are not able to pay the professional tax within the stipulated schedule and the time, then penalty is imposed on the employer or the employee. The amount of penalty can be up to 10% of the professional tax amount.
Procedure of Professional Tax
Under section 16 of the act of income tax, deduction of professional tax is carried as income tax. For the wage earners and the salaried employees, professional tax is deducted from the salary of the employee or the wage earners. Their employers deduct the professional tax amount and submit it with the state government.
For the persons, if they come under working professionals, then they need to submit their professional tax to the government of the state. State government collects the professional tax. Even local bodies of the state or the Panchayats can also collect the professional tax. To collect the professional tax, a Panchayat needs to be an active entity and fall under the jurisdiction of the state government.
Individual working professionals or employers who come under the jurisdiction of the professional tax are responsible for registering themselves as the payer of the professional tax by filing the necessary form. Various states impose various professional tax rates.
History of Professional Tax
The professional tax is imposed on the income earned via employment, calling, trade and profession. The professional tax is charged by the state governments. This tax was started in 1949 and some states are given the right to charge this tax via the clause (2) of constitution of India, article 276.
The professional tax is similar to income tax in some aspects. The Central government impose the income tax and State governments impose the Professional tax.