The slab rate for professional tax in India is decided by each State, just like it is for all other direct taxes. In this article, we discuss the authorities responsible for collecting and paying professional tax to the respective state governments.
Professional tax is a state-level tax imposed on income derived from a profession, trade, calling, or employment. This tax is computed based on income slabs and applies to both self-employed individuals and employees working in organisations. Currently, there is a cap of ₹2500 on the professional tax amount that can be levied. If you are employed and receive a regular paycheck, you are obligated paying professional tax, a deduction commonly seen on monthly pay stubs. It is usually listed beneath gross income, allowances, and HRA. Similar to EPF, TDS, and other deductions, professional tax is subtracted from the gross pay.
Contrary to the misconception that professional tax is exclusive to professionals like doctors and lawyers, it applies to anyone receiving a salary. To understand the concept of professional tax better, let’s delve into its details.
What is Professional Tax?
Professional tax is a levy on various forms of employment, trades and professions, calculated on respective income levels. Individuals falling into categories such as employees, business operators, freelancers and professionals, are liable to pay this tax if their earnings surpass the specified threshold.
| As per Article 246 of the Indian Constitution, the power to enact laws related to income taxes lies exclusively with the Parliament for items listed under the Union List. Laws pertaining to the Concurrent and State lists are within the legislative authority of the respective states. |
Who Levies P Tax?
The Income Tax Act is administered by the Central Government, while the responsibility for the professional tax lies with the states. States impose a direct tax on individuals earning income via professional tax levies. Although state governments manage p tax registration, it’s important to note that not all states levy this tax on individuals.
Under Article 246 of the Indian Constitution, the Parliament holds exclusive authority to enact laws related to income tax. On the other hand, states are empowered to enact legislation concerning certain taxes, including professional tax, under Article 276 of the Indian Constitution.
Professional Tax Slab in India
As the state government is responsible for implementing professional tax, these rates vary from state to state. Each state has its own specific laws and regulations governing professional tax.
Moreover, Article 276 of the Constitution grants state governments the power to levy professional tax. However, the maximum limit for levying professional tax is set at ₹2,500.
Professional Tax Applicability
Professional tax is applicable on the following classes of persons:
- Physicians and other medical professionals
- Businesses and Commercial Firms
- Clubs
- Limited Liability Corporations (LLP)
- Architects
- Licensed Accountants (CA)
- Management consultants
- Agents of insurance
- Tax advisors
- Company Secretaries (CS)
- Indian Unified Family
- Cooperative Societies and Organisations
- Engineers
- A surveyor
- Business owners
- Businesses
- Attorney and legal professionals
Who Is Responsible For Collecting Professional Tax?
The responsibility for collecting and paying professional tax is distributed among different entities. The Commercial Tax Department, under the jurisdiction of the State, is tasked with collecting professional tax. This collected tax is then channelled into the municipality corporation budget.
Who Is Responsible For Paying Professional Tax?
On the side of paying professional taxes, the onus is as follows:
- Employers: Employers play a crucial role in the process. They are responsible for withholding and remitting professional tax to the state government on behalf of their employees. This obligation is subject to specific financial thresholds established by the laws of individual states.
- Business Owners: Business entities, including corporations, partnership firms, and sole proprietorships, are obligated to pay professional tax on their trade or profession. This includes employers who engage in professional activities.
- To comply with the regulations, businesses must possess a professional tax certificate of registration and a professional tax enrollment certification. Depending on state laws, separate registration may be required for each business.
- Freelancers: Individuals engaged in freelance careers without any employees are also required to register according to the specific legal requirements of the concerned state.
- Exemptions: Certain groups may be exempt from professional tax based on state-granted exemptions. For instance, parents or guardians of individuals with mental impairments, blind individuals, and others may be excused from paying professional taxes.
Conclusion
As a business owner, keeping track of all your employees’ tax situations can become hectic. That is why Vakilsearch is here to help you manage your tax requirements! After you get in touch with the experts at Vakilsearch, there will be no need to invest time and tedious attempts in managing employee data, their Professional Tax contributions, and payments to respective authorities.
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Read More:
- What is the Guide to Understanding Professional Tax?
- Is it possible to pay professional tax online in Maharashtra?
