1. What is Professional Tax and why is it deducted?
2. Where is Professional Tax Applicable?
3. Is it compulsory to pay Professional Tax?
4. Benefits of Professional Tax
5. Who should pay Professional Tax?
6. Registration of Professional Tax
7. How to file a Professional Tax return?
8. Penalties of Professional Tax
9.  Exemptions of Professional Tax.

What Is Professional Tax and why is it deducted?

An indirect tax that is collected by the state government in India is called Professional Tax. Any person earning either from salary or any other sources or professional activities be it a CA or CS or a doctor has to pay professional tax. In India, different states have different rates and methods for collection of this tax that has to be paid after every month.

It is deducted as it is a source of revenue for the government and is used towards the bettering the services for professionals in that state. Thus it is important to deduct Professional Tax from the salary by every employer on salary.

Where is Professional Tax applicable?

States which impose professional tax are Punjab, Uttar Pradesh, Karnataka, Bihar, West Bengal, Andhra Pradesh, Telangana, Maharashtra, Tamil Nadu, Gujarat, Assam, Kerala, Meghalaya, Orissa, Tripura, Madhya Pradesh, Jharkhand and Sikkim.

Even though it is collected by the Commercial Taxes Department of India but in some states it is collected by the Municipal Corporations. It is a source of income for the Government. The maximum amount to be paid is INR 2,500 and in line with the taxpayer’s salary as there are predetermined slabs.

It is also payable by employees in a private company. It is debited by the employer from the employees every month and is remitted to the state exchequer and in few states and in some states it is sent to the municipal corporation.

Benefits of Professional Tax

Even though there is a compulsion to pay the professional tax but with the payment of such tax one can get an income tax deduction by paying this tax.

Is it compulsory to pay Professional Tax?

 It is compulsory to pay Professional Tax.  As per the constitution of India, the applicability of the Profession tax as provided in article 276 “there shall be levied and collected a tax on professions, trades, callings and employments, in accordance with the provisions of this Act.

Every person engaged in any profession, trade, calling or employment and falling under one or the other of the clauses mentioned in the second column of the Schedule shall be liable to pay to the State Government tax at the rate mentioned against the class of such persons in the third column of the said Schedule.

Provided that entry 23 in the Schedule shall apply only to such classes of persons as may be specified by the State Government by notification from time to time.”

Article 276 in the constitution of India 1949

• Notwithstanding until provisions to the contrary is made by Parliament by law and any law made by the Parliament may be made either generally or in relation to any specified state
• The power of the Legislature of a State to make laws as aforesaid with respect to taxes on profession, trades, callings and employments shall not be formed in any way that limits the power of the Parliament to make laws with respect to taxes on income accruing from or arising out of professions, trades, callings and employments.

Who should pay Professional Tax?

It is the responsibility of the owner to deduct the Professional Tax form the salaries of the employees. The amount so collected has to be collected to the appropriate government department. He/She has to furnish a return and this, in turn, has to be submitted tax department in a specified form within a fixed period of time.

In case of employees, their employer is required to pay the Professional Tax to the State Government subject to some fixed amount as prescribed by the Legislature.

Employers under the jurisdiction of “State Government” as the nominated authority shall pay by way of challan through the bank. Furthermore, if an employer has employed more than 20 employees, he is required to make payment within 15 days from the end of the month but if the number is less than 20 then the amount should be paid quarterly (i.e, by the 15th of the next month)

Registration of Professional Tax

When registration is concerned, the employer has to apply for the Registration certificate from their respective State Tax Department within 30 days of employing the staff. One has to apply to the authority on whose jurisdiction one works if he is operating in different states.

How do I file a Professional Tax return?

• Locate the Professional Tax website for the state you are in
• The Professional Tax form should be filled with diligence and care
• Verify the information provided by you and pay the professional tax online
• One can also pay his/her Professional Tax at the district sales tax office.

Penalties of Professional Tax

A penalty of Rs. 5 per day is imposed if there is a delay in obtaining the registration certificate. Non or late payment of professional tax 10% of the amount of tax will be payable. In case of late filing of returns, a fine of Rs.1000 will be imposed per return post due date of 1 month.  Post 1 month a fine of Rs. 2000 is imposed.

Exemptions of Professional Tax

• Parents of any children who are physically or mentally disabled permanently
• Any member of the force as defined in the Army Act, 1950, Air Force Act, 1950, Navy Act, 1957.
• Members of the auxiliary forces or reservists.