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Professional Tax

What Is The Interest Rate For Late Payment Of Professional Tax?

Late payment of taxes can lead to penalties and may charge an amount to be paid to the specified legal authority. One can get a penalty on the tax of 10%. The professional taxes must also be paid on time. Read this blog to know more.

A professional tax is a different tax than an income tax. And it is directly imposed; hence it is also known as a direct tax. As the central government governs the income tax, the professional tax is imposed by the state government. There are many differences between the two taxes. Also, delay in paying any of these taxes can lead to several penalties, according to the specific rules. There are penalties and interest rates for late payments related to the late payment of professional taxes. One must ensure that the taxes are paid on time to reduce the different penalties and make the procedure seamless.

The professional tax is paid to the state government every year. This tax is paid by individuals who earn income through practicing their different professions. Individuals like engineers, doctors, architects, accountants, teachers, and many more pay professional taxes depending on their tax slabs. These tax rates may vary from state to state, as the individual state governments govern them.

Professionals living in Union Territories don’t need to pay professional taxes because the central government governs them. Hence, they only pay the income tax and other taxes. There are interest rates imposed on the late payments of the professional tax. These interest rates are also decided by the state government and are changed as per the changing situations. One must not delay the tax payment to avoid the penalties.


What is a Professional Tax?

The professional tax is the tax imposed by the state government o a particular state in India on the working-class citizens residing in the state. This tax is paid by working professionals who earn income by profession, trade, employment, or calling. The form for the professional tax was first levied in 1949 in India. And the power to collect taxes has been given to the different states by Article 276 of the constitution of India.

Each state declares different slabs based on the different income groups, and the people are supposed to pay their taxes based on these tax slabs. Whereas, there are few states which don’t change any professional tax. Also, union territories are directly managed by the central government. Hence, they also don’t pay any professional tax. Every working-class individual in a state is supposed to pay this tax. 

The calculation of this tax differs from state to state, and the amount collected is also different. This tax is paid by dividing the annual professional tax of an individual into 12 different installments. These installments are paid every month. The inception month of this tax is February; hence, the tax is higher this month. If an individual fails to pay the taxes on time, penalties and interest rates on the installments are imposed.

There can be scenarios where an individual’s income sources can help to decide different taxes in addition to the professional tax. The employers are supposed to collect a certain amount of the professional tax from the employees. Then the employer pays the collected professional tax to the state government. If the employer fails to do so, it can lead to penalties for not abiding by the rules and regulations.

What is the Interest Rate for Late Payment?

The professional tax is similar to the income tax but differs in many scenarios. When the professional tax was first imposed in India, the maximum tax limit to be collected was INR 250 per year. But this limit was later raised from INR 250 to INR 2,500 in 1988 because of the changing situations.

The state government is requesting the Parliament to raise the amount of INR 2,500 to INR 7,500. However, the Parliament didn’t accept the request. The request may be accepted shortly, based on the changing conditions of the Indian economy. The amount paid as professional tax is tax deductible as per Section 16 of the Income Tax Act, and the balance amount is levied as per the different slab rates of the Income Tax.

In the case of wage earners and workers working for an organization, the professional tax is collected by the employer. The employer then pays this tax to the state government and clears the process. If the employer fails to do so, it leads to penalties. In the case of self-employed individuals, this tax is paid by the individual by filing a form and paying the tax in the bank with the help of a registration number.

Professional tax is collected by some states themselves in India. And some states don’t require any payment of professional tax. Every individual eligible to pay this tax must apply for the Professional Tax Registration in the respective form with the respective authority. This can be done either by oneself or by the employer.

For late payments, the interest rates in usually 1.25% per installment, that is, per month. And also, the government can charge a penalty of 10% on the whole tax. This interest rate is different for different states as per the different laws. In Karnataka, the late payment interest rate is 1.25% per month. Also, the state government of Karnataka charges a maximum penalty of 50% on the total tax amount. These penalty rates are different for different states.


Hence, this was detailed and brief information about professional tax and the different interest rates imposed on the tax if an individual fails to pay the tax on time. Hence, one must pay the professional tax on time to avoid the different fines, penalties, and interest rates. One must take these taxes seriously and pay all of them on time. To know about these taxes more, one can research on the internet and take help from a taxation firm.

We are an Indian law firm called Vakilsearch and we can help in getting more knowledge about these taxes and our different norms. We can also help file an ITR, legally save taxes, and many other services. Vakilsearch is India’s leading legal, tax, and compliance services platform.

We have worked with more than 50,000 customers giving them positive results. We also have registered atleast 10% of the total Indian companies. Hence, this makes our services more trustworthy and efficient. With our team of highly qualified lawyers, charted accountants, and many other professionals, we can help in solving any legal, taxation, or compliance issues efficiently.

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