Filed the ITR before the deadline? Great!
But have you filed your professional tax return?
What is Professional Tax?
Each state government of India levies a professional tax on the salary a resident earns through employment.
It is mandatory for every private limited company, sole proprietor, limited liability partnership firm, etc. to apply for the professional tax registration upon incorporation irrespective of whether they have any employees or not.
The employer is responsible to deduct the tax amount from the salary of the employee and deposit it to the state.
Who has to pay a professional tax?
1. All employees (govt. or private) who receive a monthly salary
2. Individuals involved in trade or professions
3. All other class employees- the person himself is liable to pay the tax
Who is exempted from professional tax?
1. Parents or guardians of children with disability
2. Individuals with a physical disability
3. Members serving the state, the nation (Air Force, Navy, Army and other Auxiliary forces.)
4. Individuals over 65 years of age
*Note- The above provisions can vary from state to state.*
How is it calculated?
Professional tax is deducted from the gross income of the employee. Just like income tax, professional tax also depends on the income slab of the individual.
However, the tax slabs differ in different states. The tax slab depends on various factors for each state, such as gross income of individuals, the number of employees and gross turnover of business.
The employer has to apply for Professional Tax Registration Certificate from the State Department within 30 to 60 days of employees’ hiring.
In case the company has offices in different states then, a separate Registration Certificate needs to be applied to each jurisdiction’s authority. Some states may not have a central registration platform and thus different municipal corporations take over. A penalty is levied for any delay in registration which further varies from state to state.
Deduction and Submission
The employer is required to deduct professional tax from the employee’s salary and submit that to the concerned department.
The employer also has to provide a return to the Tax Department in the prescribed form, within the due date.
A penalty of Rs 1000 per return is imposed if the filing was done one month past the due date. After that, a penalty of Rs 2000 is impossible.
Non-payment/ Late payment
Not paying the tax even after possessing a ‘Certificate of Registration’ or delaying the payment of professional tax results in a hefty penalty. The penalty for late professional tax payment differs from state to state.
1. A state can impose a penalty starting from 10% but not exceeding 50% on the total amount due.
2. Moreover, interest on late payment can also be charged, which can be up to 1-2% per month.
3. If the information provided by the individual is incorrect, one may be liable to pay the tax that is three times higher.
Where is professional tax not applicable?