If you are a working professional and receiving your salary every month, you will probably notice a small portion of deductions made along with all other deductions (i.e. HRA, conveyance charges and others), which is also known as Professional Tax. Professional Tax is a state level tax charged on all salaried employees and professionals such as Chartered Accountants, Lawyers, doctors, teachers, and others depending on the employment industry, trade or profession of the concerned individual.
In case of wage earners and salaries employees, the employer is responsible to make deductions and collect professional tax and submit the same to the state government. Whereas in case of self-employed individuals, such individual shall be required to be submitted by such person on his own.
Professional Tax is a state level tax applicable in states like Maharashtra, Gujarat, Tamil Nadu, Karnataka, West Bengal, Andhra Pradesh, Kerala, Tripura, and Assam in India. As the tax is applicable in some states, the applicability of the tax and the applicable rate of taxation differs from state to state subject to a maximum limit of Rs. 2500 per annum.
Before making such deductions and submitting professional tax to the concerned state government, it is important for the eligible persons to obtain professional tax registration within a period of 30 days of employing staff in a business for employers and within a period of 30 days from the start of business practice. In case of an employer his business establishment in more than one place, then a separate application for registration is required to be filed before each authority having jurisdiction of the concerned region.
Where there are more than 20 employees in a workplace, the employer is required to submit professional tax within a period of 15 days from the end of each month. However, if there are lesser than 20 employees, the employer is required to make quarterly submissions within a period of 15th of the next month from the end of each quarter.
Further, the rules related to professional tax prescribe the following penalties–
- Failure to Get Registration- Professional Tax rules also prescribe for liability in case any applicable employer or self-employed individual fails to obtain Professional Tax certificate in a timely manner. Thus, any self-employed individual or any employer shall be liable to a minimum penalty of Rs. 5 per day for the period for which the applicant remains unregistered.
- Failure to submit professional tax within due date- Similarly, for any delay in submission of professional tax, such person shall be liable to a penalty of 10% of the applicable amount of tax and for delayed submission of return. The tax officers shall have the power to recover the amount of tax along with interest and carry prosecution against such person in serious cases.
- Failure to submit returns- Such person shall be required for paying at least Rs. 300 per return for each return by the employer or self-employed person.
Pay Professional Tax with Legalmart
The process of professional tax registration is a simple and quick process which could be easily completed either through online or offline mode. However, it is always important to take expert assistance for helping you throughout the procedure of getting professional tax certificate and completing compliances related to payment and submission of returns related to professional tax. Legalmart will provide you end-to-end guidance for registration as well as payment of professional tax at your convenience at standard charges.
Benefits of Paying Professional Tax
Many states have it mandatory for the eligible applicants to obtain professional tax registration for the business employers and to deduct the same from the salary of employees which allows benefits such as-
- Tax deductions- Employees are allowed to claim deductions for the amount of professional taxes paid under section 16 of the Income Tax Act 1961 for the year in correspondence to which taxpayer has made tax payments. Such deductions shall be on the basis of the amount of professional tax paid during the previous year on salary/income of the individual.
- No Fines or Penalties- Where professional tax is applicable, non –registration and non-adherence the applicable compliances shall lead to fines & penalties which may increase for the period of non-registration or till compliances are satisfied.
- Easy to Comply- The provisions regarding registration of professional tax are available through online as well as offline mode for the convenience of the eligible applicants. Further the legal regulations related to Professional Tax are easier to comply with and could be processed easily as compared to other tax systems.
- Welfare & Benefits for Local Area- Since professional tax is a state-level tax, such generated revenue is used towards implementation of welfare schemes in the local area.
- Availability of Professional Help- Though the rules related to professional taxation and the rates of taxation differ from state to state, there is availability of professional help for registration and submission of tax payments to the concerned Government.
- Avoidance from Prosecution and other actions- Once a person has successfully obtained registration, he/she is required to ensure all compliances including payment collection, submission to the Government and submission of returns. Failing to do the same can invite inspections from tax officers and on finding guilty, tax officers can undertake recovery of unpaid tax amount along with interest from the assets of the company, can seize business property and even undertake attachment of bank accounts and initiate prosecution in serious cases.
Read more about: “Tan Registration“
Disadvantages Of Paying Professional Tax
Some of the drawbacks related to professional taxes include-
- Higher costs of production for businesses- Every employer has to undertake professional tax registration within a period of 30 days from the date of employing staff. Therefore, for a newly incorporated business who already has tight budgets, the applicant has to incur costs related registration, filling, return submissions and failure to do the same can attract fines apart from other costs, which means further costs for business.
- Lack of reliable sources for professional tax- However, the process of professional tax registrations in a simple and quick process however lack of reliable sources for registrations and compliance purposes makes it difficult for the businesses for their timely completion. Further, it is possible that the best compliance professionals will have their lists full before you approach them for services.
- Limited Applicability- As provided above, professional tax is a state level tax and each state has its separate rates and rules regarding compliances, which makes it confusing and complex for businesses having presence in more than one states in India.
What are Professional Tax rate slabs?
Professional tax being a state subject varies from state to state, while some states prefer to charge professional tax as a fixed percentage of income, while others charge a fixed amount on the basis of income slabs. Provided below are professional tax rates in some significant states-
|Name of State||Monthly Income||Tax amount/rate(per month)|
|Gujarat||Below 6000/-Between 6000-8999/-Between 9000-11999/-Above 12000/-||NilRs. 80Rs. 150Rs. 200|
|Karnataka||Below Rs.15, 000 p.m. Beyond Rs.15000/-||Nil|
|Kerela||Below Rs.11,999Between Rs.12,000 to Rs.17,999Between Rs.18,000 to Rs. 29,999Between Rs.30,000 to Rs. 44,999Between Rs.45,000 to Rs. 59,999Between Rs.60,000 to Rs. 74,999Between Rs.75,000 to Rs. 99,999Between Rs.1,00,000 to Rs. 1,24,999Rs.1,25,000 and above||Nil120|
|Telangana (For Business entities)|
For Professionals such as legal, CA, accountant etc.
|Below Rs. 15,000Between Rs.15,001 to Rs.20,000Above Rs.20,001 |
For the initial five years Above 5 years
Rs. 2,500 (annually)
|West Bengal||Below 10,000 Between 10,001 to 15,000Between 15,001 to 25,000Between 25,001 to 40,00040,001 and above||NilRs. 110Rs. 130Rs. 150Rs. 200|
|Maharashtra||Till Rs. 7,500 Till Rs. 10,000 Between Rs. 7,500 to Rs. 10,000 Above 10,000 onwards||Nil (for male)Nil (for female)Rs. 175 (for male)|
Rs. 200 for 11 months + Rs. 300 for 12th month
Applicability Of Professional Tax
Professional Tax is applicable in following states & union territories of India-
- Madhya Pradesh.
- West Bengal.
- Andhra Pradesh.
- Tamil Nadu.
- Daman & Diu.
- Dadra & Nagar Haveli.
Non-Applicability Of Professional Tax
However, professional tax is not applicable in the following states & union territories-
- Uttar Pradesh.
- Himachal Pradesh.
- Arunachal Pradesh.
Eligibility Criteria For Professional Tax Registration
- Every salaried person or wage– earner in the eligible states such as Tamil Nadu, Andhra Pradesh, Gujarat, Maharashtra etc. engaged in all types of trades and professions is eligible to get registration.
- In case of salaried employees and wage– earners working with any business entity or organization, it is the employer of such organization who is responsible for undertaking registration, collect and deduct professional taxes from the salaries/wages of the employees and submit returns to the concerned state government.
- In case of self– individual receiving monthly income in pursuance of any work undertaken by them, such individuals will be required to obtain registration and pay professional taxes. Such individual should be employed in any specialized fields such as accountancy, legal practice, media etc. and others.
But, certain individuals are exempted from the requirement of getting professional tax registration as per professional tax rules despite meeting other requirements-
- Individuals having children suffering from any mental disability or any permanent disability.
- Members of the forces as provided under the provisions of Indian Army Act 1950, Indian Air Force Act 1950 & Indian Navy Act 1957 including members of auxiliary forces or reservists in the state.
- Individuals suffering from any permanent disability (i.e. any deaf, dumb, and blind) individual earning a salary.
- Any person holding permit for a single three-wheeler or a single taxi to carry goods.
- Any handicapped individual having at least 40% disability.
- Employer running an educational organization teaching students up to a class 12.
- Women working as Mahila Pradhan under policies like Mahila Pradhan Kshetriya Bachat Yojana or acting as an agent to Director of smaller savings.
Documents Required For Professional Tax Registration
Following is the list of documents to be attached with the application for professional tax registration-
- Scanned copy of the proof of incorporation and constitution of business (i.e Certificate of incorporation, including MOA and AOA/LLP agreement)
- Scanned copy of PAN of the business entity duly attested by the authorized officer.
- Proof of registered address of the business entity along with a No objection certificate (NOC) from the property owner in case the property has been taken on rent or on lease.
- Details regarding business bank account of the business entity or self- employed individual accompanied by a blank cheque.
- Proof of identification of the directors/partners of the business entity along with a passport sized photograph.
- Copy of Board resolution/ consent of all the directors or partners authorising signatory for registration purposes.
- Copy of Shop and establishment certificate where applicable.
How To Pay Professional Tax Online
The process of professional tax registration is different for each state. In case a business has presence in more than one state, then such applicant has to obtain professional tax registration for all such states. Here is a step by step process to obtain professional tax registration and making payment online-
- Step 1: Open online portal of state government made for facilitation of professional tax registration and create a user id & password.
- Step 2: Click “New registration” and fill the form along with attachments like identity proof, proof of address, and identity proof of all the directors/partners/proprietors of the business entity or self-employed professional.
- Step 3: Fill all the details related to salaried and wage-earners staff details with the application form for employees’ details and signatures filled by them.
- Step 4: Submit form on the portal for which an acknowledgment will be provided within 5 to 7 working days.
- Step 5: On submission of the application, the form will be verified by the concerned commerce department of the state and on satisfaction of requirements, a certificate of registration will be granted within 15 to 20 working days.
Process Of Payment Of Professional Tax Online
For every state, it is the commercial tax department to collect professional tax from employers or from self-employed individual. An employer can also optionally submit professionally tax through challan at the nearest bank branch authorized for tax collection by state government.
Here is the step-by-step process for submission of professional tax online-
- Step 1- Open online portal of the state commercial tax department of the concerned state dedicated for professional tax purposes such as e-Prerana portal for Karnataka etc.
- Step 2- Log on to the portal and select Enrolment e-payment option provided under head “E-services”.
- Step 3- Fill the unique taxation identification number provided in the professional tax certificate and date of professional tax registration and click “GO”.
- Step 4- Make payment of professional tax for which an acknowledgement shall be generated.
Why You Choose Legalmart?
We at Legalmart are committed to provide expert level assistance with our professional knowledge and years of experience in professional tax registration, tax payments and returns filling from time to time. Further, we offer to provide following services in case you intend to apply for professional tax registration-
Preparation of Application & Collection Of Documents
We understand that being a business owner or an employer is not an easy task and without proper knowledge legal formalities could be hectic to perform on your own. Therefore, we at Legalmart our professional experts help to go through the process of registration, collect necessary documents and prepare your application ready to be submitted to the portal.
End to End Assistance in Registration Process
Once documents are collected, our professional experts will fill and submit application for approval with the concerned commercial tax department. After which authorities will verify form and on being satisfied, issue Professional tax registration certificate .We are also open to 24*7 customer assistance or for entertaining any requisite queries about the process.
Payment of professional tax and returns
On registration, an applicant is expected to take note of the fact that every state has its own rules and timelines for payment of professional tax and submission of returns. We at Legalmart also hold expertise in undertaking and completing the same in a simple, quick and efficient manner at standard charges.