The professional tax amount is a figure that prominently appears on the play slip as a deduction from salary. Along with Employees Provident Fund contribution and Income-tax (TDS). Professional tax (PT) is imposed by specific state governments in India on persons earning a salary for rendering services or on persons practicing various professions, for instance, Doctors, Directors, Chartered Accountants, Cost and Management Accountants, Company Secretaries, etc.
The state governments are empowered by Article 276 of the Constitution of India to impose the PT. Hence, this tax slab is different for different states. However, the parliament of India has fixed a maximum ceiling limit of PT to be deducted has been placed at Rs.2,500 per annum. The entire PT deducted or paid can be claimed as a deduction while filing the income tax returns.
Persons liable for paying Professional tax:
- It is the employer’s responsibility to collect and pay the PT in case of salaried employees are liable to the state government.
For Whole-time director or managing director:
As these directors are employees of the company, the employer needs to deduct the PT and deposit it as prescribed by the state government
They have to personally pay the PT as per the prescribed slab and the periodicity mentioned
- A company engaging in a profession also needs to pay professional tax as it has its own separate existence as an entity.
- Self-employed professionals have to pay this tax personally to the government.
The following persons are exempted from payment of Professional tax:
- An individual with a permanent disability.
- Parents and guardians whose children have permanent or mental disabilities.
- Senior Citizens over 65 years of age.
- Members of the Army Act, 1950, the Air Force Act, 1950, and the Navy Act, 1957, auxiliary forces or reservists, serving in the state.
- Badli workers in the textile industry
- Women agents under Mahila Pradhan Kshetriya Bachat Yojana or Director of Small Savings Scheme.
Specific states where Professional tax is applicable are:
The states imposing Professional tax in India are Andhra Pradesh, Assam, Bihar, Gujarat, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Puducherry, Punjab, Sikkim, Tamil Nadu, Telangana, Tripura, and West Bengal.
Steps involved for payment of Professional tax:
The registration process for payment of PT:
- Every person/entity who is liable to pay the PT needs to apply for a registration certificate and obtain a PTE number.
- In the case of employers who need to collect tax from employees, whole-time directors, and managing directors and pay it to the government, they need to obtain a PTR number for payment of their liability to the government.
- If the employer has more than 1 office, then separate registration is required for each office.
Documents required for registration:
- Address proof of place of business/ establishment
- Certificate of Incorporation for companies
- Address proof and PAN card of proprietors, partners, directors, etc.
- Photographs of proprietors, partners, directors, etc.
- Financial statements of the business/ establishment/ company
- Salary details of employees
Timeline for filing for registration certificate:
- Employers/Companies employing employees, whole-time directors, and managing directors need to obtain a registration certificate. For payment of professional tax liability within 30 days of employing the employee.
Professionals, freelancers, companies, and other directors have to obtain professional tax registration. That too within 30 days of commencement of their profession, service, and business activity.
Payment of Professional tax and filing returns:
- In the case of companies employing salaried staff, whole-time directors, and managing directors the professional tax has to be paid by the employer. It is by deducting professional fees every month from the salary of the employees and limiting the amount of deduction to Rs.2500.
- For Professional persons, freelancers, companies, and other directors’. The professional tax has to be paid annually limited to Rs.2,500 as per the slab of the respective state.
Since PT is a matter of the states. The slabs, payment dates, and method of payment differ from state to state. However, for most states, the entire professional tax payable is divided into 12 monthly installations payable each month.
Professional tax returns have to be filled as per the state requirements at specified time intervals.
Consequences for non-payment of Professional tax:
The amount of penalty for non-registration and non-payment of professional tax is different for each state.
However, if the person/ entity is liable to get himself/ herself registered and pay professional tax. Fails to do so then the government officials will levy a penalty. And interest for non-payment of taxes for the applicable period.
The officials can also file prosecution in matters of serious concern.
Professional tax registration and its payment can be challenging for companies. Those who have offices in various states have many employees as well as professionals who are too busy setting up their business/ profession.
It is also overwhelming for first-time taxpayers. Who are unaware of the procedure of registration and payments based on slabs and income earned.
If you are struggling with PT registration and payments, Diligen is here to make this challenging task easy. Diligen has well-trained financial professionals who can ease the complexities of registration across various states for companies, professionals, and self-employed persons. The professionals at Diligen are well versed with the PT requirements of different states and can easily guide clients across various states.
At Diligen we provide customized and digital support to clients as per their business needs and facilitate in:
- Enrollment and issue of registration certificates (PT Enrollment Certificate and PT Registration Certificate)
- Regular and documented follow-ups
- Expert advice and solutions for clients across various states
Diligen helps to simplify the entire process and provides all these services digitally to the clients so they do not need to step out of their comfort and easily obtain their registration and fulfill their obligation of professional tax payment.