The term “Professional tax” is a well-known term often heard by the salaried employee as it would have been mentioned in the payslips/Form 16 issued to them. Not everyone understands what it is exactly and why is it appearing in their payslips/Form 16 as a deduction from their salary income. Therefore, this article will better enlighten you about what is Professional tax and why is it deducted and is it only salaried class who are bearing it.

Professional tax and the levitation

It is the tax which a person earning an income from salary or anyone practicing a profession such as the chartered accountant, company secretary, lawyer, doctor etc. required to pay. Professional tax is the tax by the governments of India. Different states have different rates and methods of collection. But not all states impose this tax in India. Following are the states which impose professional tax:—

  • Punjab
  • Karnataka
  • Bihar
  • West Bengal
  • Andhra Pradesh
  • Telangana
  • Maharashtra
  • Tamil Nadu
  • Gujarat
  • Assam
  • Kerala
  • Meghalaya
  • Odisha
  • Tripura
  • Madhya Pradesh
  • Sikkim

This tax is basically levied by particular Municipal Corporations and the majority of the Indian states impose this duty. It is one of the source of revenue for the government. There are predetermined slabs for tax with tax payer’s salary and the maximum amount payable per year is INR 2500. Not only this rather it is also payable by members staff employed in private companies. This tax is deducted by the employer every month and sent to the Municipal Corporation. It is mandatory and the tax-payer is eligible for an income tax deduction for this payment.

According to Article 246 of the constitution of India, only Parliament has the exclusive power to make laws with respect to Union List which includes taxes on income. Whereas State has the power to make laws only with respect to Concurrent list and State list. Even then, Professional tax is a kind of tax that is levied by the state government. Under Article 276 of the constitution of India which deals with a tax on professions, trades, callings, and employment, the state government is also empowered to make laws with respect to professional tax though being a tax on income.

Professional Tax Rate

Mostly, every state has its own laws and regulation to govern professional tax of that particular state. So, all the states do follow slab system based on the income to be levied.

Few elaborated slabs in the country

Professional tax rate slabs in Karnataka

Monthly Salary/Wages (Rs.) Amount (Rs.)
Upto 15000NIL
More than 15000Rs. 200 per month

Professional tax rate slabs in Andhra Pradesh

Monthly Salary/wages (Rs.)Amount (Rs.)
Up to 15000NIL
Between Rs. 15001-Rs. 20000Rs. 150 per month
More than Rs. 20000Rs. 200 per month

Who is responsible to collect and pay professional tax?

Generally, it is collected by the Commercial Tax department. In the respective states, the commercial tax department collects it which ultimately reaches the fund of a municipal corporation.

Responsible person to pay professional tax

  • In employees case, an employer is that person who is responsible to deduct and pay this tax to the state government subject to the monetary threshold if any provided by respective state’s legislation.
  • Further, employers viz. partnership firms, corporates, sole proprietorship etc who is carrying on profession/trade also required to pay professional tax on his profession or trade again subject to the monetary threshold if any provided by respective state’s legislation.
  • In such a case, an employer needs to register and obtain both professional tax registration certificate to be able to pay it on his profession/trade and the tax enrolment certificate to be able to deduct the tax from his employees and pay. So, separate registration may be required for each office depending on the respective state’s legislation.
  • People who belong to freelancing business without any employees also required to register themselves subject to the monetary threshold if any provided by respective state’s legislation.
  • Although, its levy is a subject to the exemption provided by the respective state to certain categories. For instance, if parents or guardian of any person who is suffering from mental retardation, blind persons are exempted among others from a levy of Karnataka tax.

What will be the procedure to pay Professional Tax? Is there any return to be filed?

Basically, a general professional tax may be paid either online or offline. In addition, it depends on the state’s requirement professional tax return also need to be filed at specified intervals.

What will be the Consequences of violation of professional tax regulation?

The amount of penalty depends on the respective state’s legislation. Surely penalty will be levied by all such states for not registering once professional tax legislation. Besides, there are also penalties for not making the payment within due date and also failing to file the return within specified due date.

Let’s take an example, in Maharashtra state Rs 5/day is imposed as a penalty for delay in registration, Interest @ 1.25% per month of delay in payment, a penalty of 10% of the amount of tax in case of delay/non-payment of professional tax, Rs. 1000-Rs. 2000 penalty for delay in filing the return.

For further more details regarding ITR filing, the procedure of ITR filing, you can visit our website: LegalRaasta. Give us a call at 8750008585. Feel free to send your query on Email:contact@legalraasta.com. Our experts will help you provide you with the best advice.

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