A Complete Guide To Professional Tax In India

A professional tax is calculated on the basis of predetermined slabs and your salary. Anything you have to pay in between ₹ 200 to ₹ 2500 a year. Gujarat, Bihar, Karnataka, Kerala, Orissa, Assam, Andhra Pradesh, Telangana, Tripura, West Bengal, Madhya Pradesh, Meghalaya, Tamil Nadu, Maharashtra, Puducherry, Chattisgarh, Manipur and Mizoram are some of the states that impose a professional tax.

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How does professional tax registration work for you?

A company working in different states is required to register for professional tax in all the states it is present at.

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A Complete Guide To Professional Tax In India

While Budget 2019 sprang happy surprises, reducing tax payable for employees earning below 5 lakhs, there are numerous other taxes that continue to be levied on working professionals, the most important one being, Professional Tax. Most employees receiving a fixed salary at the end of a month come across a deduction in their Salary Slip by the name of “Professional Tax.” Unlike the name, it does not come across as a tax on professionals but a tax on employment, trade and profession. It is payable by employees, salaried persons, wage earners and professionals such as Chartered Accountants, Company Secretaries, Cost Accountants, etc.

It is a tax levied by the State Government, and hence they have the option to decide whether and how much of PT should be collected. Currently, the following states levy this tax.

1. Punjab

2. Karnataka

3. Bihar

4. West Bengal

5. Andhra Pradesh

6. Telangana

7. Maharashtra

8. Tamil Nadu

9. Gujarat

10. Assam

11. Kerala

12. Meghalaya

13. Odisha

14. Tripura

15. Madhya Pradesh

16. Jharkhand

17. Sikkim

Monthly Salary / Wage<br>(Basic +DA)KarnatakaAndhra Pradesh
Upto Rs 15,000NilNil
Between 15,001 and 20,000200/ month150/ month
More than 20,000200/ month200/ month

There are many simple tools for ascertaining the tax liability for a person belonging to a specific state.

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Dual registration and separate registration for each state

An employer/professional must have dual registration. The two registrations required are:

A) Professional Tax Registration Certificate to pay tax on trade or profession

B) Professional Tax Enrollment Certificate to deduct such tax from the salaries, trade, etc.

For offices with multi-state presence, since the tax regimes vary in each state, a separate registration is required for each such office established under different State Legislations. Moreover, Registration Certificate has to be obtained by an employer within 30 days of the appointment of staff.

Who is liable to deduct this tax?

Employers are responsible to deduct PT from each monthly salary payment and ensure such deduction is mentioned in the salary slip and Form 16 of employees.

Since a partnership firm, company or sole proprietor is carrying on a Trade or Profession in the capacity of a person, they, too are liable to pay this tax. Freelancers having no employees working under them must also register subject to monetary threshold limit given by the State.

Tax may be paid in online or offline mode and a challan be generated for each such successful payment. Employers must also file a Professional Tax Return in a prescribed form at regular intervals, where such time limits vary in each state.

Deposit of tax

Employer has employedMake payment within
More than 20 Employees15 days
from end of the month
20 employees or less15th of next month
from the end of each quarter

Penalties for non-compliance:

While each state has the ability to fix penalty based on its own tax laws, the regime is generally centered around the following penalties:

Delay inNon-compliancePenalty levied by most states
RegistrationNon-registration when the employer was liable to be registeredRs 5 / day
PaymentNon-payment of tax or payment after the due date.10 % of the amount of tax
Filing of ReturnNon-filing of Tax Returns or delay in filingRs 1000/ return delayed by 1 month
Rs 2000/return for a further delay.

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