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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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.
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.
The calculation of tax varies from state to state, however, the maximum being set as Rs.2500 per year.
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.
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:
If the organization is working in more than one place, then the application must be conducted separately towards the jurisdiction of each authority.
Not all states choose to levy the professional tax. There are few exempted states from the list, like:
According to the professional tax rules, there are few exemptions for certain individuals from paying the 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 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.
However, there are few penalties and charges that are imposed on the person who escapes paying the professional tax.
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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