WHAT IS PROFESSIONAL TAX?
Professional Tax Registration is a tax imposed by the State government. Professional tax is imposed on income earned in any trade or profession and is usually paid by the employer. The total professional tax payable with reference to any one person to the State or to any local authority in the State by way of taxes imposed on professions, trades, callings and employments should not exceed rupees two hundred fifty and two thousand five hundred rupees per annum.
It is a type of tax imposed on all professions, trades and employment and levied based on the income of such profession, trade and employment. It is imposed on employees, a person carrying on business including freelancers, professional etc. subject to income exceeding the monetary threshold. State government are entitle 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 eventually reaches the fund of Municipality Corporation. The professional tax is a source of revenue for the State Government which helps the state govt. in implementing schemes for the welfare and development of their respective region.
WHO ARE RESPONSIBLE TO PAY PROFESSIONAL TAX?
In case of employees, an employer is responsible to deduct and pay professional tax to the State Government on behalf of his employees subject to the monetary threshold if any provided by respective state’s regulations, employer (corporate, partnership firms, sole proprietorship etc.) also being a person carrying on trade or profession is also required to pay professional tax registration on his trade or profession again subject to the monetary threshold if any provided by respective State’s regulations.
PROFESSIONAL TAX RATE
The maximum amount due per annum towards professional tax is INR 2,500. The professional paid tax registration is charged based on income slabs rate on the gross income of the professional. It is to be deducted from his income every month. In case of Salaried and Wage-earners, the Professional Tax is liable to be deducted by the Employer at the time of payment from the Salary or Wages, and the Employer is liable to deposit the same with the state government. In case of other class of Individuals, the very person is liable to be pay it himself.
WHAT IS PROFESSIONAL TAX CERTIFICATE?
There are two types Professional tax certificates available:
PTEC (Professional Tax Enrollment Certificate):
This is paid by the business organizations, owner or professionals i.e. Private Limited Company or Public Limited Company, Sole Proprietor, Director Etc.
PTRC: (Professional Tax Registration Certificate):
Government or Non- Government employers who Deduct the tax from the employee’s wages and deposit the same to the government.
Professional tax is applicable once the person starts his profession or business within 30 days of starting the profession. In case the company has its business in more than one places, then it is required to take registration for each such place.
WHAT IS THE APPLICABILITY OF PROFESSION TAX?
Company, Firms and LLP:
Company, firms, LLP, Corporation, societies, HUF, Associations and clubs are taxable entity.
Professionals(Individuals):
Legal Practitioners like management consultants, tax consultants, surveyors, CS, CA, Insurance agents, engineers and other professionals like solicitors, Notaries, medical representatives like dentist, medical consultants, doctors, architects and contractors are all considered as professional individuals who is liable to pay professional tax.
DOCUMENTS REQUIRED FOR PROFESSIONAL TAX REGISTRATION
Acknowledgement of the online form, also the hard copy of the e-form submitted
PAN Card of the applicant
Address proof of Partner, Director, and Proprietor
Certificate of Incorporation of an organization
Address proof of registered place of business
Blank Cancelled Cheque with organizations name preprinted on it
Establishment Certificate
PAN& PTEC details of the applicant
PROFESSIONAL TAX REGISTRATION PROCESS
The professional tax registration process varies state to state, the tax slab rates can vary from one state to another. If the business owner has employees under different states, then one has to get a professional tax registration for all the states.
The number of returns which one needs to file will depend on the state the person have his work place in. before filing a return it’s important to know the rules and regulations of the respective states.
You can get registered as a payee of professional tax in a local professional tax office at that specified state.
It is essential for all the individuals and businesses that are liable for the tax payment.
Calculate the amount need to pay for professional tax in the prescription form. The payment and calculations done should be audited by the chartered Accountant.
In case of employment, the employer has to deduct the professional tax from the salary of employees at the time of payment made to employees.
Once the person gets registered under professional tax, then he is liable to pay Professional Tax within the given time; different professions are specified with different PT rates.
RESPONSIBLE PERSON FOR DEDUCTING PROFESSIONAL TAX
An employer is responsible for deducting the professional tax from the salaries of his employees and deposit the collected amount to the local government authorities, also he need to file a return to the respective department in a prescribed form with proof of tax payment within certain period of time.
Employer (Corporate, sole Proprietorship, Private Limited) is also liable to pay the tax imposed on his trade or business.
