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Know whether you are eligible for paying professional tax


A tax is a monetary charge imposed on the taxpayer i.e. an individual or a business entity by the state government or any authorized body. The collected charge serves the purpose of funding public expenditure. One of these taxes is the professional tax which was introduced in India in the year 1949. Every earning individual has to do professional tax registration mandatorily.

Who are eligible for paying professional tax?


Professional Tax is the charge levied by an Indian state for the income earned by the individual either by trade, profession, calling or employment. It is quite equivalent to income tax, the only difference is that the

  • Income tax is imposed by the central government, whereas
  • Professional tax is levied by the state government

Professional tax is levied by the state and it is considered as state revenue. Not only by the government entity but the tax is also payable by the member of a private company. The tax rate is based on income slabs of each state. This method ensures taxes are levied equitably.

The maximum professional taxes to be collected is Rs.2,500 per annum for any state. However, the professional tax is not imposed by all the states. It is imposed on people of only a few states, those are:

  • Chhattisgarh
  • Sikkim
  • Gujarat
  • Madhya Pradesh
  • Tamil Nadu
  • Andhra Pradesh
  • Tripura
  • Odisha
  • Bihar
  • Maharashtra
  • Karnataka
  • Telangana
  • West Bengal
  • Assam
  • Meghalaya
  • Kerala

Who is eligible to pay professional tax?


The owner of businesses is responsible to deduct the salaries of his employees and deposit the amount collected to the relevant government department. Depending on the nature of the business, the tax may be paid monthly, semi-annually or annual basis.

Next, professional tax returns must be filed to the tax department at the end of every financial year. It must be filed in the pre-described form (with the proof of the tax payment) within a specified time.

If the tax payment proof is not included, the application will be deemed to be incomplete or invalid.

Professional tax certificate


There are two types of professional tax certificates that a business entity must withhold in India.

  • PTEC (Professional Tax Enrollment Certificate) – Paid by the business entity, owner or a professional i.e. Pvt Ltd., Public Ltd., Sole Proprietor, Director, etc.
  • PTRC (Professional Tax Registration Certificate) – Government or Non-Government employer deducts the tax from the employee’s wages and deposit the same to the Government.

However, a fully functional business entity requires both the certificates to conduct its operations.

Professional tax registration process


Professional tax is applicable once the person begins his profession or business. The person himself is responsible to register within the relevant department within 30 days of starting the profession. In case the company has its presence in different places, then it is required to take registration for each such place.

Below is the process of professional tax registration online:

1. Get registered as a payee of professional tax in a local professional tax office at that specified state.

2. It is imperative for all the individuals and businesses who are liable for the tax payment.

3. Calculate the pay of professional tax in the prescribed form. It must be done by the owner itself.

4. The payment and calculations done must be audited by a Charted Accountant.

5. When it comes to employees, the employer has to deduct the salaries of employees for the professional tax.

6. Apart from the payee, the professional tax must also be paid for his own activities, to the tax department.

Once the person gets registered, he is then responsible to pay PT. However, different professions are specified with different PT rates.

Documents required:


There are various documents that are required for professional tax registration. Some of them are:

  • Acknowledgement of the online form, along with the print out of the digital form submitted
  • Copy of PAN card
  • Residence proof of partner, director, proprietor
  • Proof of constitution of business
  • Address proof of business place
  • Blank cancelled cheque
  • Establishment certificate
  • PAN & PTEC details

All these documents are required to be self-attested.

Penalty:

The tax has to be paid within the time period specified by the respective State Government. The due dates will be provided within the act. In the uneventful case of failing to pay the tax, penalty and late fee would be penalized by the Government.

  • In case of breach of the rules, a penalty of 2% per month is imposed
  • In case of non-payment, 10% of additional payment is imposed
  • In case of delay in obtaining the certificate of enrollment, a penalty of Re.2 per day is imposed
  • In case of misrepresentation, 3 times the amount due is payable as the penalty.

Who are exempted from paying professional tax:

  • Foreign employees are exempt from paying professional tax.
  • Indians employed by the Foreign office and consultant are excluded from taking the certificate of registration.

There might arise a question “How the Professional Tax collected is utilized?” The answer is simple, the tax collected in the above process acts as revenue for the state government, which is then may be implemented in welfare schemes, overall growth and development schemes of the state.

Know the calculation of Professional Tax.

Why Vakilsearch


50 Verified Vendors

We've tied-up with some of the best vendors in major cities of the country to get you your Professional Tax Registration. We've completed 500+ registrations in the past 12 months.

9.1 Customer Score

We make your interaction with government as smooth as is possible by doing all the paperwork for you. We will also give you absolute clarity on the process to set realistic expectations.

160 Strong Team

Our team of experienced business advisors are a phone call away, should you have any queries about the process. But we'll try to ensure that your doubts are cleared before they even arise.

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