Individuals who make a living through employment, the practice of a profession, or business are subject to the direct tax known as professional tax.
Overview
A professional tax applies to individuals who earn their living through employment, a profession, or a business practice. Professionals practising include doctors, teachers, lawyers, chartered accountants, etc. Employers withhold taxes from their employees’ monthly paychecks and deposit them with the state government. In addition to paid employees, professionals pay it directly to the government.
Professional Tax
Upon reviewing your payslips, you will notice a slight deduction alongside the breakdown of your HRA, conveyance, and basic salary. Professional Tax is a deduction that is usually around 200 rupees. Depending on the State, professional taxes may not be deducted in some areas. Therefore, the question arises: what exactly is professional Tax?
What Exactly Is Professional Tax?
The state governments in India impose taxes on professional income. Professionals who earn a salary, such as lawyers, teachers, doctors, chartered accountants, etc., must pay this Tax. The Employer handles deducting professional taxes from the salaries or wages of salaried or wage earners and depositing them with the state government. Individuals belonging to another class are responsible for paying their taxes. The amount and calculation of the Tax will vary from State to State, but it is capped at the largest of ₹2500 per year.
Professional Tax Registration
All employers must register as professionals with the IRS within 30 days of hiring new employees. Other professions must register within 30 days of the commencement of their practice. If the Employer has many locations, registration must be requested under each State’s laws. In some cases, employers may find it difficult to comprehend the registration procedures of all the states where professional taxes are applicable.
Professional Tax Registration Certificate
Mandatory Registration
Within thirty days of the date on which company operations began, each business entity must receive the Professional Tax Certificate of Enrollment (EC) from the Profession Tax Officer.
Registration Tax for Professionals
Each Employer must pay Rs. 2500.00 in professional Tax upon registration.
Annual Professional Tax Payment
Each year in April, every registered Employer must pay a professional tax of Rs. 2500.00.
Calculating a Professional Tax
Taxation of professionals is a state matter. The method for paying the professional Tax is not set in stone. It can be paid online or offline, depending on the firm’s State. Besides, the State sets the professional tax return filing frequency and format.
Applicability of Professional Tax
- Professional Tax is a tax on income from profession or employment levied by state governments in India.
- Individuals who earn an income from salary or other professions, such as lawyers, teachers, doctors, chartered accountants, etc., must pay this Tax.
- Salaried and wage earners have the Tax deducted by their Employer from their salary or wages, which is deposited with the state government.
- Self-employed individuals are liable to pay the Tax themselves.
- The amount of Professional Tax and the calculation method may vary from State to State, but the largest limit is INR 2500 per year.
- Failure to pay Professional Tax can result in penalties or legal action by the state government.
- Professional Tax is a source of revenue for state governments and is used to fund various civic amenities and services.
ONLINE PROFESSIONAL TAX REGISTRATION
Those Exempted From Paying Professional Tax
Here are the exemptions provided for certain individuals to pay Professional Tax under the Professional Tax Rules in India:
- Parents of children with a permanent disability or mental disability
- Members of the forces as defined in the Army Act 1950, the Air Force Act 1950 and the Navy Act 1957, including members of auxiliary forces or reservists, serving in the State.
- Badli workers in the textile industry.
- An individual suffering from a permanent physical disability (including blindness).
- Women only engaged as agents under the Mahila Pradhan Kshetriya Bachat Yojana or Director of Small Savings.
- Parents or guardians of individuals suffering from a mental disability.
- Individuals above 65 years of age.
- These individuals are not required to pay Professional Tax as per the rules.
Process for Professional Tax Employer Registration
Registration / Incorporation of a Business
Register the company as a sole proprietorship, partnership, limited liability company, or legal entity.
A Request to the Department of Professional Taxes
Send the Professional Tax Department your online Employer Registration (Enrollment Certificate) application and any necessary supporting documentation.
How to Get an Enrollment Certificate (EC)
After submitting your application, send Leave your supporting documentation so that you may get your Certificate of Enrollment (EC). States and Union Territories That Do Not Pay Professional Tax. Following are some of the Indian states and union territories where no professional tax is applicable:
- Arunachal Pradesh
- Himachal Pradesh
- Delhi
- Haryana
- Uttar Pradesh
- Uttarakhand
- Andaman and Nicobar Islands
- Daman & Diu
- Dadra and Nagar Haveli
- Lakshadweep
- Jammu & Kashmir
- Punjab
- Rajasthan
- Chandigarh
- Goa
Professional Tax Slabs
Professional Tax slabs in India refer to the different tax rates applied to individuals based on their income from profession or employment. In most states, the Professional Tax slabs are based on a progressive tax system, where individuals earning higher incomes are taxed at higher rates than those earning lower incomes.
The chart below exhibits the highest professional tax slab rates in various states of India
| STATE | SALARY LIMIT – GROSS | PT AMOUNT |
| Andhra Pradesh– Monthly | From 15001- 20000 | 150 |
| Above 20001 | 200 | |
| Assam – Monthly | From 10001-15000 | 150 |
| From 15001-25000 | 180 | |
| Above 25001 | 208 | |
| Bihar – Yearly | From 3L -5L | 1000 |
| From 5L -10L | 2000 | |
| Above 10L | 2500 | |
| Gujarat – Monthly | Above 12000 | 200 |
| Jharkhand – Yearly | From 3L -5L | 1200 |
| From 5L -8L | 1800 | |
| From 8L- 10L | 2100 | |
| Above 10L | 2500 | |
| Karnataka – Monthly | Above 15000 | 200 |
| Kerala – Quarterly | From 12000-18000 | 120 |
| From 18000- 30000 | 180 | |
| From 30000-45000 | 300 | |
| From 45000-60000 | 450 | |
| From 60000-75000 | 600 | |
| From 75000-1L | 750 | |
| From 1L -1.25L | 1000 | |
| Above 1.25L | 1250 | |
| Madhya Pradesh – Monthly | From 2.25L- 3L | 1500 |
| From 3L-4L | 2000 | |
| Above 4L | 2500 | |
| Maharashtra – Monthly | From 7500-10000 | 175(Nil for women) |
| Above 10000 | 200(Feb 300) | |
| Manipur – Yearly | From 50000-75000 | 1200 |
| From 75000-1L | 2000 | |
| From 1L -1.25L | 2400 | |
| Above 1.25L | 2500 | |
| Odisha – Yearly | From 1.6L -3L | 1500 |
| Above 3L | 2500 | |
| Puducherry- Yearly | From 1L – 2L | 250 |
| From 2L – 3L | 500 | |
| From 3L – 4L | 750 | |
| From 4L – 5L | 1000 | |
| Above 5L | 1250 | |
| Punjab – Monthly | Above 2.5L | 200 |
| Tamil-Nadu – Half-yearly | From 20000-30000 | 135 |
| From 30000-45000 | 315 | |
| From 45000-60000 | 690 | |
| From 60000-75000 | 1025 | |
| Above 75000 | 1250 | |
| Telangana – Monthly | From 15000-20000 | 150 |
| Above 20000 | 200 | |
| West Bengal – Monthly | From 10000-15000 | 315 |
| From 15000-25000 | 690 | |
| From 25000-40000 | 1025 | |
| Above 40000 | 1250 | |
| Meghalaya – Monthly | Between 50001 To 75000 | 200 |
| Between 75001 To 100000 | 300 | |
| Between 100001 To 150000 | 500 | |
| Between 150001 To 200000 | 750 | |
| Between 200001 To 250000 | 1000 | |
| Between 250001 To 300000 | 1250 | |
| Between 300001 To 350000 | 1500 | |
| Between 350001 To 400000 | 1800 | |
| Between 400001 To 450000 | 2100 | |
| Between 450001 To 500000 | 2400 | |
| Above 500001 | 2500 | |
| Mizoram – Yearly | Between 5001 To 8000 | 75 |
| Between 8001 To 10000 | 120 | |
| Between 10001 To 12000 | 150 | |
| Between 12001 To 15000 | 180 | |
| Above 15001 | 208 | |
| Nagaland– Yearly | Between 4001 To 5000 | 35 |
| Between 5001 To 7000 | 75 | |
| Between 7001 To 9000 | 110 | |
| Between 9001 To 12000 | 180 | |
| Above 12001 | 208 |
Professional Tax Registration and Returns
- Rules for professional taxes can change over time.
- Talk to experts before paying professional Tax.
- Contact Vakilsearch for help with professional Tax for your business.
- We can help you understand if you need to pay the Tax and explain how to register.
- Our experts will ensure everything goes smoothly.
- We will keep the cost as low as possible.
Consequences of Non-compliance With Regulations
Failure to Get Registration
The person will be penalised for the period during which they remain unregistered.
Failure to Deposit to the Government/Late Deposition
The person will be penalised for the period during which they remain unregistered.
Non-Deposition of Amount
- Officials can recover the amount along with applicable penalties and interest from the defaulter’s assets.
- They can also attach the defaulter’s bank account.
- In serious cases, a prosecution case may also be filed.
Conclusion
The rules for professional taxes can change over time. It’s a good idea to talk to experts in this area before you pay your professional Tax. If you need help with professional Tax for your business, you can contact Vakilsearch. We can help you understand if you need to pay this Tax and explain how to register. Our experts will ensure everything goes smoothly and won’t cost you too much.
FAQs
Should businessmen pay professional tax?
Yes, businessmen are typically required to pay professional tax as it is levied on individuals engaged in various professions, including business activities. The tax amount varies based on the applicable tax regulations in the specific region or jurisdiction.
Is professional tax applicable on a company?
Professional tax is not applicable to companies. It is a tax levied on individuals, professionals, and practitioners of various trades and occupations. Companies, being distinct legal entities, are not subject to professional tax.
Who is exempt from professional tax?
Certain categories of individuals, such as senior citizens, persons with disabilities, and those earning below the prescribed threshold, may be exempt from professional tax. Exemptions can vary by jurisdiction, and individuals falling within specified categories may not be liable to pay professional tax.
What happens if professional tax is not paid?
Non-payment of professional tax can lead to legal consequences, including penalties and fines imposed by the tax authorities. It is essential for individuals and professionals to comply with professional tax regulations to avoid legal repercussions and ensure financial integrity.
Is professional tax calculated on basic salary?
Yes, professional tax is often calculated based on the basic salary of an individual. The tax rates can vary depending on the applicable state or local regulations. Employers typically deduct professional tax at source and remit it to the tax authorities on behalf of their employees.
What is the professional tax for 25000 salary?
The professional tax amount for a 25000 salary depends on the specific tax slab and rates applicable in the relevant jurisdiction. Different states or regions may have varying tax structures, and individuals should refer to the local tax regulations to determine the accurate professional tax liability.
Is TDS and professional tax same?
No, TDS (Tax Deducted at Source) and professional tax are distinct concepts. TDS is a mechanism where a certain percentage of income is deducted at the source before making payments, while professional tax is a direct tax levied on individuals by state governments based on their professions or occupations.
Why do companies deduct professional tax?
Companies deduct professional tax from the salaries of their employees as a legal requirement. It is a form of direct taxation levied by state governments on individuals engaged in various professions. Companies act as intermediaries to ensure compliance and facilitate the remittance of professional tax to the relevant authorities.
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