Professional Tax

Professional Tax INR - 2,000.00

Under the Indian Constitution, the State Governments have power to levy Professional Tax, which is a tax on persons carrying on business/profession or employment, within the state. While many State Governments do so, some State Governments have opted not to levy Professional Tax.

Currently the annual Professional Tax levy is capped at Rs.2,500 under the Constitution of India.

The States of Andhra Pradesh, Gujarat, Karnataka, Maharashtra and West Bengal levy Professional Tax. The States of Goa, Haryana, Himachal Pradesh, Kerala, Rajasthan, Bihar, Punjab and Tamil Nadu have empowered their municipal bodies to levy and collect Professional Tax. The States of Delhi, Uttar Pradesh, Uttaranchal, Jharkhand and Arunachal Pradesh do not levy Professional Tax.

Employer – Applicable for the company or the person who is treated as an Employer. Even if the company/ person does not employ any work force, this registration is applicable. In most of the states, this is a generally around Rs.2500.00 which is paid annually.

Employee –  Applicable for any employee who is in service/ employment of any company. Tax rates are based on income bands and are paid monthly/ quarterly through their employe

Every company which transacts business and every person who is engaged actively or otherwise in any profession, trade, calling or employment in the State where Professional Tax is levied, is liable to register and pay professional tax. In case of employees, the employer is obligated to obtain registration and withhold profession tax from the salary paid to the employees. The employer is also obligated to deposit the same and file returns at periodic intervals.

Professional Tax is a tax levied on professions and trades in India. It is a state-level tax and has to be compulsorily paid by every member of staff employed in private companies.

Article 276 of the Constitution of India lays down that “there shall be levied and collected a tax on professions, trades, callings and employments, in accordance with the provisions of this Act. Every person engaged in any profession, trade, calling or employment and falling under one or the other of the classes mentioned in the second column of the Schedule shall be liable to pay to the State Government tax at the rate mentioned against the class of such persons in the third column of the said Schedule. Provided that entry 23 in the Schedule shall apply only to such classes of persons as may be specified by the State Government by notification from time to time.”

The maximum amount payable per annum towards professional tax is INR 2,500. The professional tax is usually a slab-amount based on the gross income of the professional. It is deducted from his income every month.

The slab for professional tax varies across the different states in India.Click here for the different slab rates.

The state governments of the following states have levied professional tax – Karnataka, West Bengal, Andhra Pradesh, Maharashtra, Tamil Nadu, Gujarat, Assam, Chattisgarh, Kerala, Meghalaya, Orissa, Tripura and Madhya Pradesh.

• The owner of a business is responsible to deduct professional tax from the salaries of his employees and pay the amount so collected to the appropriate government department.
• He has to furnish a return to the tax department in the prescribed form within the specified time.
• The return should include the proof of tax payment. In case the payment proof is not enclosed, the return shall be deemed incomplete and invalid

• Apply for the Registration Certificate to your state’s tax department within 30 days of employing staff for your business
• If you have more than one place of work, apply separately to each authority as regards the place of work coming under the jurisdictionof that authority

• Delays in obtaining Registration Certificate, a penalty of Rs. 5/- per day
• In case of non/late payment of profession tax, penalty will be 10% of the amount of tax
• In case of late filing of returns, a penalty of Rs. 300 per return will be imposed

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