All About Professional Tax in India

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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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Receipt of Tax Number

The TIN will be issued within 15 days of the application

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Data Check

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Vendor Connect

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Receipt of Tax Number

The TIN will be issued within 15 days of the application

All About Professional Tax in India


When you have ever taken a look at your payslips or Form16, you will notice that there is a deduction mentioned along with the basic salary and conveyance. This deduction generally ranges up to Rs.200 per month and is termed as a professional tax.

Professional tax is applicable in India and generally differs from state to state. However, in a few states, they observe no deduction at all.

This article provides you with a clear picture of what is professional tax and when it is applicable in India.


All You Need to Know

What is professional tax?


The individual state governments of India impose the professional tax on trade, calling, profession or employment of a person based on their income. Only salaried class employees bear the professional tax. It can be either salary or money earned from other practices like Doctor, Lawyer, CA, etc. The person is subject to pay the tax if he/she is exceeding the monetary threshold income provided by the State’s legislation.

  • In the case of salary earners, the tax is deducted by the employer directly from the wages/salary amount of an employee. He is solely responsible for depositing the amount in the respective government department.
  • In the case of other class individuals, the tax must be paid by the person himself.

The calculation of tax varies from state to state, however, the maximum being set as Rs.2500 per year.

Professional tax rate


Every state conducts its own laws and regulations in governing the professional tax. However, there is a slab system that is followed based on the income of its residents.

Professional tax registration in India


It is mandatory to register for a professional tax payment within 30 days of starting a business, corporation or practice. The application must be made with the relevant state department.

After successfully registering, there are two types of professional tax certificates that must be obtained by the employer:

  • Professional tax registration certificate – Ability to pay the professional tax for his trade or profession.
  • Professional tax enrolment certificate – Ability to deduct the tax from his employees and pay it.

If the organization is working in more than one place, then the application must be conducted separately towards the jurisdiction of each authority.

  • If an employer contains more than 20 employees, then the tax must be paid within 15 days from the end of each month.
  • If an employer has less than 20 employees, then the payment can be made quarterly.

States where professional tax is applicable in India

Andhra Pradesh Jharkhand Maharashtra Nagaland Sikkim
Assam Karnataka Manipur Odisha Tamil Nadu
Bihar Kerala Meghalaya Pondicherry Telangana
Gujarat Madhya Pradesh Mizoram Punjab Tripura

States where professional tax is not applicable in India

Not all states choose to levy the professional tax. There are few exempted states from the list, like:

Andaman and Nicobar Islands Chhattisgarh Delhi Himachal Pradesh Rajasthan
Arunachal Pradesh Dadra and Nagar Haveli Goa Jammu and Kashmir Uttar Pradesh
Chandigarh Daman and Diu Haryana Lakshadweep Uttarakhand

Exemptions of professional tax


According to the professional tax rules, there are few exemptions for certain individuals from paying the professional tax:

  • Individuals with an age of 65 years and above.
  • Parents or guardians of children suffering from permanent or mental disability.
  • Women engaged under Mahila Pradhan Kshetriya.
  • Individuals suffering from a disability, including blindness.
  • Badli workers in the Textile Industry.
  • Member of Army Forces, like Air Force, Navy Act, including the auxiliary forces of the State.

Who is responsible for deducting professional tax?


An employer is responsible for deducting the professional tax from the salaries of his/her employees and deposit the collected amount in the appropriate government department.

He is also liable to file a return to the department in a prescribed form that too with the proof of tax payment within a certain period of time.

Additionally, employer (executing the titles, Corporates, Solo Proprietorship, Private Limited) is also liable to pay the tax on his trade or business.

In the case of other class individuals, the tax can be paid directly to the government or through the authorized local body.

Professional tax applicable in India


Professional Tax is collected by the Commercial Tax Department of the respective state, which eventually reaches the municipality corporation fund.

The maximum amount of professional tax that can be imposed by any state in India is Rs.200 per month, which brings down to Rs.2500 per annum. Beyond this, the professional tax cannot be charged on any person.

The total amount paid during a year is allowed as a deduction under the Income Tax Act.

The professional tax collected in the above method acts as revenue for the state government in implementing welfare and development schemes of the region.

Chargeability:


However, there are few penalties and charges that are imposed on the person who escapes paying the professional tax.

  • No registration – Liable to pay penalty for the period the company remained unregistered.
  • Fail to deposit/late payment – Liable to pay penalty for the period he/she didn’t deposit the tax.
  • Non-payment – Recurrence of amount along with applicable penalty and interest.

In case of serious issues, a prosecution can also be filed by the authorized department.

Here’s a A Complete Guide To Professional Tax In India.

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