PROFESSIONAL TAX
Professional tax is a direct tax imposed on individuals earning income through professional practices, employment, trade, or any other occupation. Unlike central government income tax, professional tax is levied by state governments or union territories in India. For salaried individuals, employers are responsible for deducting professional tax from their salary or wages and remitting it to the state government. Other individuals are required to pay this tax themselves. The calculation and amount of professional tax may differ between states, but it is capped at a maximum of Rs. 2500 per year.
Steps should be followed by the employer’s Responsibility
Enrolment: Employers must enroll themselves and their employees for professional tax with the relevant tax authorities. This entails obtaining the necessary registration certificates and adhering to the registration process within the stipulated time frame.
Tax Deduction: Employers are mandated to deduct professional tax from their employees' salaries or wages based on the prevailing tax rates. These deductions should be made at the time of payment and in compliance with applicable tax laws and regulations.
Punctual Payment: Employers bear the responsibility of promptly remitting the deducted professional tax to the appropriate tax authorities within specified deadlines. Adherence to payment schedules and timely fulfillment of tax obligations are imperative to avoid penalties or legal repercussions.
Record-Keeping: Employers are obliged to maintain accurate records pertaining to professional tax deductions, payments, and employee particulars. These records should be systematically organized, retained, and made accessible for scrutiny by tax authorities as needed.
Adherence to Tax Regulations: Employers must adhere to all relevant tax laws, guidelines, and regulations concerning professional tax. They should stay informed about any alterations in tax rates, thresholds, or filing requisites and ensure compliance accordingly.
Reporting and Submission: Employers are accountable for timely reporting and submission of professional tax returns, as mandated by tax authorities. This entails furnishing precise information regarding employees, deductions, and payments made during specified reporting intervals.
Employee Communication: Employers should effectively communicate professional tax deductions, payment particulars, and any alterations in tax regulations to their employees. This fosters transparency and helps prevent misunderstandings or disputes related to professional tax.
Documents Required For Registering A Sole Proprietorship
Certificate of Incorporation or LLP Agreement
Memorandum of Association (MOA) and Articles of Association (AOA)
PAN Card of Company, LLP, Proprietor, Owner, or Director
No Objection Certificate (NOC) from the landlord of the business premises
Passport-sized photos of the Proprietor, Owner, or Director
Address and identity proofs of the Proprietor, Owner, or Director
Information regarding employees and their salaries
Any additional registrations and licenses
Exemption for Professional Tax
Certain individuals are exempt from paying Professional Tax as per the Professional Tax Rules. The following categories are eligible for exemption:
Parents of children with permanent or mental disabilities
Members of the armed forces, including auxiliary forces or reservists, serving in the State
Substitute workers in the textile industry
Individuals with permanent physical disabilities, including blindness
Women solely engaged as agents under the Mahila Pradhan Kshetriya Bachat Yojana or as Director of Small Savings
Parents or guardians of individuals with mental disabilities
Individuals aged 65 years or above
Due Dates for the Professional Tax Payment:
If an employer has a workforce exceeding 20 employees, payment is due within 15 days from the month's end. Conversely, if the workforce is fewer than 20 employees, payment is required quarterly, specifically by the 15th of the following month from the quarter's end.
Penalties for the Professional Tax
When the professional tax policy becomes applicable, jurisdictions may impose penalties for failure to register for Professional Tax. The exact penalty amount will vary depending on state regulatory laws.
Penalties are also imposed for late submission of the PT return or withholding payments after the due date. Each state's professional tax regulations determine the specific fines. Businesses that fail to register for professional tax, pay taxes late, or submit returns after the deadline may face fines, late fees, or even imprisonment.
Additional penalties are incurred for failure to make payments by the due date or for late filing of returns. For instance, the Maharashtra Government imposes the following penalties for late filing or non-payment of Professional Tax:
Failure to obtain PT registration: Rs.5 per day
Late filing of PT return: Rs.1,000
Late payment of PT dues: Interest at 1.25% per month, plus a penalty of 10%
For example, if a professional tax payment of Rs.1 Lakh is delayed by 12 months, the simple interest payable would be Rs.1,250 and a penalty of Rs.10,000, resulting in a total of Rs.11,250.
The maximum penalty for a delay in payment of Rs.1 Lakh for a year, with delayed return filing, is Rs.12,250.
Start Professional Tax Registration
