Professional Tax Registration

Professional Tax Registration and Compliance

The practice of a profession, job, calling, or trade generates revenue that is subject to professional taxation, which is a direct tax imposed on those individuals. Professional tax in India is assessed by a state or union territory government, as opposed to the Central Government's income tax. If a person is paid a salary or wages, their employer is required to withhold professional tax from their pay and deposit it with the state government. For those who fall under another category of people, the employee is responsible for paying the tax. There is a cap of Rs. 2500/- each year, albeit the calculation and amount collected may differ from State to State.

Professional Tax Applicability

This tax is levied on all kinds of professions, trades, and employment. Profession tax is applicable to the following classes of persons:

• An Individual
• A Hindu Undivided Family (HUF)
• A Company/Firm/Co-operative Society/Association of persons or a body of individuals, whether incorporated or not

The professionals earning an income from salary or other practices such as a lawyer, teachers, doctors, chartered accountants, etc. are required to pay professional tax.

Professional Tax Applicable States across India

Please refer to the following table to know more about the states which impose professional tax in India:

Professional Tax Rate

In terms of professional tax, INR 2,500 is the maximum annual payment. A slab amount depending on the professional's total revenue often represents the professional tax. Each month, it is taken out of his paycheck.

The nodal agency for collecting professional tax is the Commercial Taxes Department of a state or union territory, and these departments vary depending on which state or union territory you are talking about. The tax can be paid annually or on a monthly basis and is based on the person's taxable income for the year.

Who Pays Profession Tax?

If a person is salaried or paid an hourly wage, their employer must withhold professional tax from their salary or wages and deposit it with the state government.

Self-employed individuals who run their own business and are subject to profession tax are responsible for paying the tax to the state government.

Employer’s Responsibility for Professional Tax

An organization's owner is in charge of deducting professional tax from employee salaries and remitting the funds to the relevant government agency. In the allotted amount of time, he or she must submit a return to the tax agency in the required form. Documentation of tax payment must be included with the return. The register will regard the return as invalid and incomplete if the payment proof is not enclosed.

Exemptions for Payment of Professional Tax

There are exemptions provided for certain individuals to pay Professional Tax under the Professional Tax Rules. The following individuals are exempted to pay Professional Tax:

• Parents of children with permanent disability or mental disability
• Members of the forces as defined in the Army Act, 1950, the Air Force Act, 1950, and the Navy Act, 1957 including members of auxiliary forces or reservists, serving in the State.
• Badli workers in the textile industry
• An individual suffering from a permanent physical disability (including blindness)
• Women exclusively engaged as agents under the Mahila Pradhan Kshetriya Bachat Yojana or Director of Small Savings.
• Parents or guardians of individuals suffering from a mental disability.
• Individuals, above 65 years of age

Professional Tax Registration and Compliance

Professional Tax Registration is mandatory within 30 days of employing staff in a business or, in the case of professionals, 30 days from the start of the practice.

• Application for the Registration Certificate should be made to the assessed state tax department within 30 days of employing staff for his business.
• If the assessee has more than one place of work, then the application should be made separately to each authority with respect to the place of work under the jurisdiction of that authority.

Due Dates for Professional Tax Payment

If an employer has employed more than 20 employees, he is required to make the payment within 15 days from the end of the month. However, if an employer has less than 20 employees, he is required to pay quarterly (i.e. by the 15th of next month from the end of the quarter).

Professional Tax Return

The Professional Tax Return is to be filed by all the persons having Professional Tax Registration and the due dates for filing of such returns vary from State to State.

Benefits of Professional Tax Registration

The benefits of Professional tax Registration are given below:

• It is simple to comply with the Professional Tax Compliance, which results in a smooth registration process with minimum restrictions.
• It is compulsory to pay Professional tax as per the law. Hence, the timely payment of Professional tax can help avoid penalties and any punitive action against the Employer or a self-employed person.
• Professional Tax Compliance is simple, which can enable a smooth and hassle-free Registration Process.
• The Professional Tax acts as a revenue source for the state governments that helps the government to implement schemes for the various welfare and development of the region.
• The Employer or the self-employed person can claim a deduction on the previously paid professional tax.

Documents required for Professional Tax Registration

• Certificate of Incorporation / LLP Agreement
• MOA and AOA
• PAN Card of Company/LLP/Proprietor/Owner/Director
• NOC from the landlord, where the business is situated
• Passport size photos of Proprietor/Owner/Director
• Address and identity proof of Proprietor/Owner/Director
• Details of employees and salaries paid
• Additional registrations and licences

Procedure for Professional Tax Registration

The procedure for Professional Tax Registration depends from State to State. Further, Returns must also be filed at specified intervals depending on the State’s requirement. Professionals /Employers seeking professional tax registration shall follow the below-mentioned procedure.

• The applicant must file the application form and the requisite documents.
• The applicant needs to submit the Application with the necessary documents to the concerned state government. A copy of the same should also be submitted to the tax department.
• On receipt of an application, the tax authority shall scrutinize the application to ensure that all the information is correct.
• Issue of Registration Certificate: The authority will issue the Registration certificate after successfully scrutinizing all the documents.

Penalties Related To Professional Tax Registration

All of these jurisdictions have the right to levy a fine for failure to register for professional tax when it becomes applicable. But state regulatory law will determine the specific penalty's amount.

PT returns that are not submitted by the deadline or payments that are withheld after they are due are likewise subject to penalties. The specific fine is determined by the professional tax laws of each state. Businesses who do not submit their returns on time, register for professional tax, or pay their taxes late risk fines, late fees, and even incarceration.

Additional fees are assessed if payments are not made by the due date and returns are not submitted by the due date. Examples of penalties levied by the Maharashtra government for late filing or nonpayment of professional tax in Maharashtra are provided below.

For example, professional tax of 1 Lakh is delayed by 12 months, then the simple interest payable is ?1,250/- and a Penalty of 10,000. Total= ?11,250

Maximum Penalty for delay in payment of Rs.1 Lakh for a year and return filing also delayed = 12250