Professional Tax Applicability

Professional tax is levied on all types of trades and professions in India. It has to be paid compulsorily by every staff member who is employed in any private firm operating in India. Professional tax registration is the onus of every business owner, who must take up responsibility for deduction of professional tax and payment for the same

Professional Tax Variation With Each State

Professional tax payment will always have distinct rates that keep varying from state to state. The state governments which are levying state tax are West Bengal, Maharashtra, Karnataka, Kerala, Assam, Madhya Pradesh, Orissa, Tripura, Meghalaya, and Gujarat.

Professional Tax For Self-Employed

Any professional who gets a regular income on a monthly basis will have to pay the professional tax. By the term professional, we imply people working in specialized fields like accountancy, media, medicine, information technology, media, etc.

Professionals offering freelance services also need to pay professional tax using a special type of form. They can fill the form and get a registration number first. Then, using that number, they can pay their taxes in the corresponding banks.

In certain states in India, specifically , Maharashtra Profession Tax Act amended from 1.4.2018, Now a Limited Liability Partnership and each partner of LLP shall be liable to pay PT of Rs. 2,500/- per annum.

Exemption from professional tax payment

The following individuals are exempted from pa professional tax:

• Parents of children with a permanent disability or mental disability.
• Members of the armed forces, including members of auxiliary forces or reservists, serving in the state.
• Individuals, over 65 years of age.
• An individual who is physically challenged (also visually challenged).
• Women exclusively engaged as agent under the Mahila Pradhan Kshetriya Bachat Yojana or Director of Small Savings.
• Parents or guardians of individuals who are mentally challenged
• Badli workers in the textile industry.

Why pay Professional Taxes? Benefits

Here are the reasons why one should never miss a professional tax payment

It Is A Judicial Requirements

As per the rules and regulations of India, every employee is bound to make the professional tax payment without fail. Employers in many states of India are strictly bound by the judiciary to obtain the registration of professional tax. After the registration, they have to make the deductions and pay the service taxes of all the employees who work under them.

To Avoid Paying Penalties

Failure to professional tax registration results in huge penalties that keep on increasing over time.

Easy To Comply

When something is easy to comply, it won’t be difficult to follow. The professional tax regulations are so easy to follow that and not difficult to comply with. The registration procedures can be done quickly and the further proceedings are also much easier.

Deductions

Deductions can be claimed in the salary on the basis of the professional tax paid. The deductions will be allowed in the year corresponding to which the taxpayer made the payments.

The State Government Tax

The local authorities and the state government have the right to collect all the professional taxes based on employment, profession trades and much more. The collected amount of professional tax per annum should not go beyond Rs. 2500 per an annum.

Professional Tax Registration Process in India

The professional tax registration procedure is very easy. Here are three important points that one needs to know and understand in detail.

Varies According To State

In case you are a business owner and have employees under different states working for you, then you will have to get a professional tax registration for all the states. The tax slab rates can vary from one state to another. This can make it a cumbersome task for small-scale industries. Many states in North India do not have professional taxes.

The Frequency Of Filing Returns

The frequency with which one needs to file returns will depend on the state the person resides in. Hence, before filing for a return it is important to know the rules of the state.

The Penalties That Await

Professional tax is applicable to all types of business entities. Professional tax can be calculated on the basis of self-assessment. It mainly depends on the professional or employee’s gross income in the half-yearly stage.

If you are a person who owns a trade or employs staff in your company or is a working professional, then you will have to register at the tax authority of the State’s professional tax department. The employer is also responsible for deducting the professional tax from his/her employee’s salary. The deducted amount shall be paid to the government when the employer files their professional tax return.

Whether you belong to the category of a professional who is also self-employed or you employ people for your business TaxKavach can help you with Professional tax registration. Our Chartered Accountants and taxation professionals will offer you the right guidance and file the returns on your behalf.

The Maharashtra government, for instance, can levy a penalty of about 10 percent the amount which was delayed. Hence, the more one avoids paying the registration, the more they will have to worry about the penalties.

Documents required for Online Professional Tax Registration

Here is a list of documents required to register for professional tax:

• Certificate of Incorporation, including MOA & AOA / LLP Agreement.
• PAN card of Company/LLP which is attested by the company director
• Place of business proof along with a NOC from the owner of the premises
• Bank account of the company including bank statement and cancelled cheque.
• Passport size photographs, address and identity proof from all the directors
• Board resolution or in other words, the statement of consent by the partners.
• Shop and establishment certificate
• Salary register and attendance register

Steps involved in Online Professional Tax Registration

One Working Day

Within one working day, you will have to provide your PAN card, address proof and identity proofs of all the directors/partners/proprietors of the company. You also need to furnish the details of all employees working under you.

Two Working Days

The application form for professional tax will be then filled up by the employees and then submitted to the concerned authorities by our expert affiliates. If the documents are all provided in order, then the process will not take more than two working days.

Seven Working Days

Within five to seven working days, the basic acknowledgment will be provided by us. In case the documents are not in proper order, the inspector will ask for the missing documents. As soon as you provide the missing ones, the process will be completed. The registration hard copy will be issued within 10 days in all the major cities. In other places, it might take up to 15 to 20 working days.

Comparison Study Between Enrollment and Registration

Traders and self-employed professionals must apply for Professional Tax Registration Certificate (PTRC) and Professional Tax Enrollment Certificate (PTEC) in their respective states.

Registration Certificate is required by entities who employ individuals and pay them wages/salary. On the other hand, PTEC is required by traders and self-employed to pay the company’s and director’s professional tax.

Hence, to conclude professional tax registration is also necessary for people who are employed. Whereas enrollment is necessary for those who own a trade, business or is involved in a profession.

Understanding the Professional Tax Returns In Detail

Professional tax is to be filed annually by all the registered employers. The return should be filed with respect to the professional tax which is deposited in the financial year. The wages/ salary of the employees should be taken into consideration while filing the tax returns. The professional tax return should always be filed during the financial year end and it should also offer an opportunity to the employer to correct any omissions or errors made within the due date of submission. Entities and enrolled people need not file any return.

Understanding the Professional Tax Registration Applicability

Firms/ Company/LLP

In the case of professional tax, firms/LLP/corporations/societies/HUF/ associations/clubs/company will be considered as a taxable entity. All the branches involved in these will also be considered as a separate individual in front of the tax payment/ department of professional tax

Individual People(Professionals)

The legal practitioners like notaries and solicitors, medical representatives like dentists, medical consultants, doctors, and other professionals like management consultants, tax consultants, surveyors, company secretaries, chartered accountants, insurance agents, engineers, architects and contractors are all considered as professional individuals who need to pay professional tax.

Partners and Directors

People who act as company directors, firm partners, LLP partners and designated partners should pay professional tax. They should register under the Professional Tax Act within 30 days of getting appointed in these roles.

Employers

The employers are supposed to deduct professional tax from the salary of the people employed under them and submit it at the professional tax department during the time of filing returns. The employer will have to register at the Professional tax department before 30 days of its applicability.

What are the consequences of Professional Tax violation?

Though the actual penal interest or penalty can change according to each state’s legislation board, all states will be charged a penalty if they have not registered after the professional tax legislation is made applicable. Also, penalties will be charged if the payments are not made within the due date or if the return is not filed within the due date specified.