Individuals who make a living through employment, the practice of a profession, or business is subject to the direct tax known as professional tax. Read this blog to understand the consequences that you may face if you fail to pay the professional tax.
Pay the Professional Tax: Individuals who make a living through employment, the practice of a profession or business is subject to the direct tax known as professional tax. Professionals who are currently in practice include doctors, teachers, lawyers, chartered accountants, etc. Employers withhold the tax from employees’ monthly paychecks and deposit it with state governments. Other than paid employees, professionals pay it directly to the government.According to the Income Tax Act of 1961, certain professions may be able to deduct the professional tax they paid throughout the fiscal year. In this blog, we will explain calculating a professional tax and the consequences of non-compliance.
Professional Tax registration
All employers are required to register as professionals with the IRS within 30 days of hiring new employees. The registration is required for other professions within 30 days of the commencement of their practise.If the employer has many locations, registration must be requested for each location in accordance with the laws of the individual states.Employers may find it difficult to grasp the registration procedures of all the states where professional taxes are relevant.
Calculating a Professional Tax
Taxation of professionals is a state issue. The method for paying professional tax registration is not set in stone. Depending on the state from which the firm operates, it can be paid either online or offline. Additionally, the State determines the frequency and format of professional tax return filings. Further, Article 276 of the Constitution gives the State Government the authority to impose professional taxes, is a limit of Rs 2,500 over which no one may be subject to professional taxes.
Those exempted from paying professional tax:
The following individuals are exempted from paying professional tax under the income tax returns –
- Parents or guardians of kids who have a permanent or mental impairment
- A person who has a physical handicap that is permanent, such as blindness
- Any individual older than 65 years
- Members of the armed services, including auxiliary forces or reservists, serving in the state, as specified by the Air Force Act of 1950, the Army Act of 1950, and the Navy Act of 1957
- Women only hired as agents under the Mahila Pradhan Kshetriya Bachat Yojana Temporary workers working in the textile sector
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
- Uttar Pradesh
- Andaman and Nicobar Islands
- Daman & Diu
- Dadra and Nagar Haveli
- Jammu & Kashmir
Click here to know more: P Tax Registration
Professional Tax Slabs
The slab rates differ from one state to another. At present, the professional tax is only applicable to 16 different states in India and is levied on its local authorities.
The chart below exhibits the highest professional tax slab rates in various states of India.
|State||Gross monthly salary (Rs.)||Tax per month (Rs.)|
|Gujarat||12,000 and above||200|
|Maharashtra||10,000 and above||200 (300 for February)|
|Odisha||20,000 and above||200|
|Chhattisgarh||25,000 and above||200|
|Madhya Pradesh||15,000 and above||212|
|Bihar||83,000 and above||208|
|Karnataka||15,000 and above||200|
|Telangana||20,000 and above||200|
|Tamil Nadu||12,500 and above||182|
|Andhra Pradesh||20,000 and above||200|
|West Bengal||40,000 and above||200|
|Assam||25,000 and above||208 (212 for February)|
|Sikkim||40,000 and above||200|
|Meghalaya||41,667 and above||208 (212 for February)|
|Tripura||15,000 and above||208 (212 for February)|
|Kerala||20,834 and above||208|
Consequences of non-compliance with regulations.The real penalty is determined by the professional tax regulations of each State. Businesses who fail to register, pay taxes late, or fail to file returns by the deadline may be subject to fines, late fees, or interest.For instance, the state of Karnataka levies interest of 1.25 percent per month on any unpaid taxes. West Bengal imposes annual fees of 12 percent.If an employer fails to pay the tax while having a “Certificate of registration,” they will be fined. The government charges interest when professional taxes are not paid on time or are paid late. Therefore, it is wise to estimate your taxes and make preparations in advance to prevent fines. If not, the following results may occur:When a payment is made after the due date, interest at a rate of 1% to 2% per month is assessed.Additionally, a state may apply a penalty on the total amount owed that ranges from 10% to 50%.If the information given by the person is false, they will be required to pay a tax that is three times greater.
The general regulations controlling the professional tax may change sometimes. Therefore, it is advised to consult with professionals in professional taxation before trying a professional tax.If you require any help in calculating a professional tax, Vakilsearch would be pleased to assist you. To ensure that people have reasonable expectations, we give them clarity on the registration procedure. At the lowest possible cost, our experts will guarantee your smooth transaction.