Professional Tax in Tiruttani

Professional Tax Overview

Professional tax is a direct tax levied on individuals earning income from practicing a profession, employment, trade, or calling. Unlike income tax imposed by the Central Government, professional tax is levied by state governments or union territories in India. It is applicable to various entities, including individuals, Hindu Undivided Families (HUFs), companies, firms, co-operative societies, and associations of persons or bodies of individuals, whether incorporated or not.

Applicability of Professional Tax

Professional tax is applicable to the following classes of persons:

1. Individuals: Professionals earning income from salary or other practices such as lawyers, teachers, doctors, chartered accountants, etc.
2. Hindu Undivided Families (HUFs):
3. Companies/Firms/Co-operative Societies/Associations: Both incorporated and unincorporated entities are subject to professional tax.

Applicable States for Professional Tax

The applicability of professional tax varies across states in India. The following table provides an overview of states where professional tax is applicable and those where it is not:

Applicable States:

• Andhra Pradesh
• Assam
• Bihar
• Gujarat
• Jharkhand
• Karnataka
• Kerala
• Madhya Pradesh
• Maharashtra
• Manipur
• Meghalaya
• Mizoram
• Nagaland
• Odisha
• Puducherry
• Tamil Nadu
• Telangana
• Tripura
• West Bengal

Non-Applicable States:

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

Professional Tax Rate

The maximum amount payable per annum towards professional tax is INR 2,500. The tax is generally calculated based on predetermined tax slabs, and it is deducted from the professional's income every month. The commercial taxes department of each state or union territory is responsible for collecting professional tax.

Who Pays Professional Tax?

• Salaried and Wage Earners: The tax is deducted by the employer from the salary/wages and deposited with the state government.
• Self-Employed Persons: Those engaged in their own profession or trade are required to pay the tax directly to the state government.

Employer’s Responsibility for Professional Tax

Employers are responsible for deducting professional tax from the salaries of their employees and depositing the collected amount with the appropriate government department. They must file a return with the tax department, including proof of tax payment.

Exemptions for Payment of Professional Tax

Certain individuals are exempt from paying professional tax, including parents of children with permanent disability, members of the armed forces, badli workers in the textile industry, individuals with permanent physical disabilities, women engaged in specified schemes, parents or guardians of individuals with mental disabilities, and individuals above 65 years of age.

Professional Tax Registration and Compliance

• Mandatory Registration: Professional tax registration is mandatory within 30 days of employing staff or starting professional practice.
• Application Process: Application for the Registration Certificate must be made to the state tax department, and the process may vary from state to state.
• Due Dates for Payment: Employers with more than 20 employees must pay monthly, while those with fewer than 20 employees pay quarterly.
• Professional Tax Return: Returns must be filed at specified intervals, and the due dates vary by state.

Benefits of Professional Tax Registration

• Simple Compliance: Professional tax compliance is simple, resulting in a smooth registration process with minimum restrictions.
• Avoid Penalties: Timely payment of professional tax helps avoid penalties and punitive action against employers or self-employed individuals.
• Revenue Source for States: Professional tax acts as a revenue source for state governments, supporting welfare and development schemes.
• Deduction Claims: Employers or self-employed individuals can claim a deduction on previously paid professional tax.

Documents Required for Professional Tax Registration

• Certificate of Incorporation / LLP Agreement
• MOA and AOA
• PAN Card of Company/LLP/Proprietor/Owner/Director
• NOC from the landlord
• Passport size photos of Proprietor/Owner/Director
• Address and identity proof of Proprietor/Owner/Director
• Details of employees and salaries paid
• Additional registrations and licenses

Procedure for Professional Tax Registration

The procedure for professional tax registration varies by state. Professionals and employers seeking registration must file an application with the relevant tax authorities, and a registration certificate will be issued upon successful scrutiny of documents.

Penalties Related to Professional Tax Registration

Penalties may be imposed for failure to register for professional tax, late filing of returns, and delayed payment of taxes. The amount of penalties varies by state regulatory law.

Conclusion

Professional tax is a crucial aspect of the Indian tax system, contributing to state revenues and ensuring compliance among professionals and businesses. Understanding the applicability, rates, and compliance procedures is essential for employers, professionals, and entities subject to professional tax.

Professional Tax Registration FAQs

1. How is professional tax calculated?

• Professional Tax in India is calculated based on salary slabs, with varying rates in each state. The maximum amount is Rs. 2500 per year.

2. How much professional tax is deducted from my salary?

• Employers deduct professional tax from employees' salaries before calculating income tax. The deducted amount is then deposited with the respective State Government.

3. Is it mandatory to pay professional tax?

• Yes, professional tax is mandatory for individuals engaged in professions, trades, or employment. Non-compliance may result in penalties.

4. Why is professional tax different in every state?

• Professional tax rules vary between states, allowing each state to set its own tax slabs and rates. The maximum limit is Rs. 2500 per year, and slab structures differ among states.

5. What is professional tax, and when is it levied?

• Professional Tax is a state-level tax imposed on income earned through professions, trades, callings, or employment. It is levied based on predetermined salary slabs.

6. Is professional tax imposed in each state?

• Yes, professional tax is imposed in several states, including Andhra Pradesh, Maharashtra, Tamil Nadu, Karnataka, etc.

7. Who deducts the tax and deposits the same with the government?

• Employers are responsible for deducting professional tax from employees' salaries and depositing it with the State Government. Self-employed individuals must pay the tax directly.

8. Who has to pay professional tax in India?

• Every individual engaged in a profession, trade, calling, or employment is liable to pay professional tax.

9. Who is assessed under the Professional Tax Act?

• Employers are assessed under the Professional Tax Act and are responsible for paying the tax on behalf of their employees.

10. What is the penalty for violating Professional Tax regulations? - Penalties for non-registration or late payment vary by state. Generally, there's a daily penalty for non-registration and a percentage-based penalty for late payments.

11. Who is required to obtain a Certificate of Registration (RC)? - Every employer liable to pay professional tax for their employees must obtain a Certificate of Registration.

12. Is there Professional Tax in Union Territories? - No, individuals in Union Territories are exempt from paying professional tax, as income levels in Union Territories are generally lower than in states.

13. Who is exempt from Professional Tax in India? - Exemptions include parents of children with disabilities, members of the armed forces, certain workers, individuals with disabilities, women in specific schemes, parents or guardians of individuals with mental disabilities, and those above 65 years of age.

14. What is the maximum amount of professional Tax levied by a state? - The maximum amount any state can levy as professional tax is Rs. 2500.

15. What is the due date for payment of professional Tax? - The due date for professional tax payment depends on the enrollment date, with variations based on state regulations.