You may have seen the term Professional Tax on your paystub if you are a salaried employee. This deduction is levied as per the total income earned by an individual over and above a particular income threshold. This article will go over Professional Tax in-depth, seeking to answer frequently asked concerns and dispel common misconceptions about the subject.
What is the definition of Professional Tax?
The Professional Tax can be defined as a direct tax levied by the State Government and paid by individuals who earn money through their profession, employment, calling, or trade. It is payable as per professional tax slabs of different states.
Who is eligible to pay Professional Tax?
Applicability of Profession Tax as per the Constitution of India: Article 276 of the Constitution of India provides that any salaried person who is either a member of a Hindu undivided family, an individual, or the owner of any business, firm, or association is eligible to pay the tax. However, only if your total income crosses the given monetary threshold as specified by the professional tax slabs ofindividual states, you would be required to pay the necessary tax and not otherwise.
Professional Tax Rates in the Different States
The state governments have the authority to set the professional tax rate in their jurisdiction. It is not even collected in some states, including Chhattisgarh, Delhi, Himachal Pradesh, and Haryana.
Here’s a look at some of the professional tax slabs of different states.
| Professional tax slabs of West Bengal | |
| ₹0 – ₹8500 | Nil |
| ₹8501 – ₹10000 | ₹90 per month |
| ₹10001 – ₹15000 | ₹110 per month |
| ₹15001 – ₹25000 | ₹130 per month |
| ₹25001 – ₹40000 | ₹150 per month |
| ₹40000+ | ₹200 per month |
| Professional tax slabs of Andhra Pradesh | |
| ₹0 – ₹15000 | Nil |
| ₹15001 – ₹20000 | ₹150 per month |
| ₹20000+ | ₹200 per month |
Collection of Professional Tax
Professional Tax can be paid online. However, it is preferable for companies to deduct it from their employees’ paychecks. It is then deposited to the Commercial Tax Department. The department gathers all the money received from the employers and distributes them between the jurisdictions from where they are collected.
How to pay Professional Tax online?
You may be required to pay professional tax online in some circumstances. Every state government provides a webpage where you may pay your taxes quickly and conveniently online. You can log in after submitting the required information, and pay the tax amount. It is recommended to save the money receipt for future reference. However, the procedure of logging in requires a certain ID which differs depending on the state.
Penalties for non-compliance with the Professional Tax Laws
Failure to enroll or pay by the deadline is the most common violation of the Professional Tax Law. The former is normally punishable by Rs. 5 daily fees while the latter charges an extra 10% penalty on the total amount of professional tax you owe.
The actual amount may change in some states. Every state decides the basic consequences for breaching the regulation according to their perspective.
Key points that every new Business Owner should be aware of:
As someone considering starting a new firm, you must adhere to numerous norms and guidelines concerning professional tax. Following are the most important rules regarding professional tax:
- Application for the registration of a new firm must be done within 30 days of staff being employed to their respective state tax department.
- Within 30 days of starting a firm, it is mandatory to get the Professional Tax – Employer Registration/Enrolment Certificate (EC) from the state government.
- In the case of employing more than 20 individuals, professional tax is to be paid within 15 days from the end of the month.
- In the case of employing less than 20 individuals, the tax is to be paid quarterly.
- In the case of the owner holding more than one company or business, registration applications must be sent to the appropriate authorities in each jurisdiction.
FAQs
- Is the payment of Professional Tax obligatory?
It is mandatory for the eligible individuals who crossed the monetary threshold mentioned by the states, to pay Professional Tax. - Is it possible to get a tax exemption?
Professional tax exemptions differ by state. Crucial ones include:- Mental illness or physical disability for life, and
- Work background from the navy, the army, or the air force.
- When is the professional tax payment deadline?
The payment deadline is June 30th if you enroll before May 31st. However, if the registration is made after May 31st, payment is due 30 days after the enrolment date. - What are the benefits of paying Professional Tax?
Under the Income Tax Act, Professional Tax paid for the year is entirely deductible. It is a source of revenue for state governments that aids in the implementation of plans for the region’s welfare and development.
