Professional Tax: Procedure and Guidelines
Professional tax is levied by the State Governments in India on salaried individuals, working in government or non-government entities, or in practice of any profession, including chartered accountants, doctors, lawyers etc or are involved in business. Professional Tax is levied by the respective States. States were conferred the power of leveling the Tax under Clause (2) of Article 276 of Constitution of India,1949. The rate at which Professional tax is charged is based on the Income Slabs set by the respective State Governments. However the maximum Professional Tax that can be levied by any State till date is Rs 2500/-. The total amount of professional tax paid during the year is allowed as Deduction under the Income Tax Act. The professional tax is a source of revenue for the State Governments, used in implementing schemes for the welfare and development of the region.
Professional Tax is deducted from the salary of Employees by the Employers and same is deposited with the respective Local Body or Competent Authority appointed for the purpose. Self Employed Professionals, Partnership firms, Business Owners, Companies (it may include Associations, Corporations and Entities as covered under Act) are required to directly pay the same based on the previous year turnover or as per the rate fixed by respective State, wherein the Business is being carried out. Such entities are required to pay the tax directly to the Commercial Department of the respective State, or through the Local Body appointed for the same.
Individuals and Business Houses, may consult their Tax Advisors or visit the respective State Commercial Tax Department (Sales Tax) Office or the Official web portal for complete details regarding Professional Tax.
Business and Professionals required to pay tax may be divided in two categories,
1.) *Persons engaged in Business, Trade, Professions, Callings and Employment
2.) **Employers (including Government, Public, Private Sectors, paying Salary/Wages to Employees)
Self Employed Professionals and Traders need to apply for Enrolment Certificate as per the provisions to carry out their business in the respective State.
Whereas, Certificate of Registration is required for Entities, employing Individuals as employees in lieu of Salary/Wages. Such Employers are required to deduct Professional Tax as per existing Slab and deposit the same to the prescribed Authority.
Thus, Registration is required in respect of Individuals employed, while Enrolment is required in relation to Business, Trade or Profession.
Please note that since Professional Tax is State subject, norms for Enrolment, Registration, Payment, Return, Assessment, Exemption may vary from State to State. However, this post attempts to give an idea about the process.
Enrolment and Registration
Certificate of Enrolment is applicable to any Persons engaged in Business, Trade, Professions, Callings and Employment. A person liable to pay Professional Tax is required to apply for enrolment in the respective State, wherein the business is undertaken. All the relevant details related to business along with Branches within the State should be provided along with payment of Professional Tax as per the schedule. Failure to do so may attract fine, penalty or even imprisonment as per the provisions of the Act.
Certificate of Registration is applicable to any Employer liable to deduct Professional Tax from the Salary/Wages of the employees respectively. Such Employer is required to apply for Certificate of Registration, The application should be made within the stipulated time frame allowed for the purpose. Failure to obtain registration within the specified time frame may attract fine, penalty or even imprisonment as per the provisions of the Act.
Professional Tax may be paid online or via the offline mode, as prescribed by the Competent Authority. Normally, for Enrolled entities/persons, the Professional Tax is required to be paid within the current Financial Year or the date notified for the same.
Registered Employers are required to pay the tax on monthly or semi-annual basis, on behalf of the employees. Interest and Penalty is levied in case one fails to make the payment within the cut-off date.
All Registered Employers are required to file return on Annual basis. Return is filed in respect of the Professional Tax deposited during the Financial Year in respect of the Employees paid Salary/Wages. The Return is filed at the end of Financial Year, it also provides an opportunity to the Registered Employer to rectify errors and omissions, if any, within the due date.
Enrolled Persons and Entities are not required to file return.
Assessment of Professional Tax is also possible, in case the Business/Professional fails to get registered, deposit the tax amount, or file returns. Also in case of the Prescribed Authority is not satisfied that the return filed by the Registered Employer is correct or complete.
Provisions for appeal, amendment, cancellation, surrender of Enrollment & Registration is also available under the Act.
State Government may exempt, reduce the Profession Tax rates for any class of persons by issuing notifications.