Professional Tax

Professional Tax is like Income tax but is collected by the State Government. But unlike its name suggests it is not just levied only on professionals. It is a tax on all kinds of professions, trades and employment and levied based on the income of such profession, trade and employment. It is levied on employees, a person carrying on business including freelancers, professionals etc. subject to income exceeding the monetary threshold if any.

State government empowered to make laws with respect to professional tax though being tax on income under Article 276 of the constitution of India which deals with tax on professions, trades, callings and employment. Professional tax is a deductible amount for the purpose of Income-tax Act, 1961 and can be deducted from taxable income.

Professional tax is collected by the Commercial Tax Department. The commercial tax department of the respective states collects it which ultimately reaches the fund of Municipality Corporation.

Who are responsible to pay professional tax?

In case of employees, an employer is a person responsible to deduct and pay professional tax to the State Government subject to the monetary threshold if any provided by respective state’s legislation, employer (corporate, partnership firms, sole proprietorship etc) also being a person carrying on trade/profession is also required to pay professional tax on his/her trade/ profession again subject to the monetary threshold if any provided by respective State’s legislation.

Who are exempted from paying Professional Tax?

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

What is Professional Tax Certificate?

There are two types Professional tax certificates:

  • PTEC (Professional Tax Enrollment Certificate): This is paid by the business entity, owner or a professional i.e. Private/ Public Limited Company, 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.

Professional tax is applicable once the person begins his profession or business 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.

What is the Applicability of Profession Tax?

  • Company/Firms/LLP: Company, firms, LLP, Corporation, societies, HUF, Associations, clubs are taxable entity.
  • Professionals(Individuals): Legal Practitioners like solicitors, Notaries, medical representatives like dentist, medical consultants, doctors and other professionals like management consultants, tax consultants, surveyors, CS, CA, Insurance agents, engineers, architects and contractors are all considered as professional individuals who need to pay professional tax.

What is the professional tax Registration Process?

The professional tax registration procedure varies according to state : The tax slab rates can vary from one state to another, where the business owner have employees under different states , then one have to get a professional tax registration for all the states.

Frequency of filing returns: The frequency with which one needs to file returns will depend on the state the person resides in. before filing a return it’s important to know the rules of the state.

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

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

Calculate the pay of professional tax in the prescription form.

The payment and calculations done must be audited by the chartered Accountant.

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

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

What are the Documents required for professional tax Registration?

  • 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 like Certificate of Incorporation.
  • Address proof of Business place.
  • Blank Cancelled Cheque.
  • Establishment Certificate.
  • PAN& PTEC details.

All these documents are required to be self-attested.

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, also to file a return to the department in a prescribed form with proof of tax payment within certain period of time.

Employer (Corporate, solo Proprietorship, Private Limited) is also liable to pay the tax on his trade or business.

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

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Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

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