Professional Tax

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The tax levied and collected by state governments in India is known as professional tax. It is a tax that is levied in an indirect manner. This professional tax must be paid by someone receiving a wage or practicing a career such as chartered accountant, company clerk, lawyer, doctor, and so on. Different states have different collection rates and processes.

What is Professional Tax?
Professional tax is a tax that is levied on all kinds of professions, trades, and employment on the basis of such income. It is imposed by the state government in India.
A professional tax is a tax imposed by a state government on all people who make a living by whatever means. This is not to be confused with the meaning of professional, which refers to persons like physicians. This is a tax that must be paid by everyone who earns money. This tax affects company owners, employees, traders, and people in a wide range of occupations. The method of computation and amount collected varies by state, although there is a cap of Rs. 2500 per year.
Each professional whether the Directors of the company, partners of LLP or any other employer is under the obligation to have professional tax registration and to ensure that it must be deducted from the salary of employees. And this deducted tax is deposited in the appropriate office designated by the state government and a return of the professional tax must be filed specifying the payment of professional tax.
What are the documents required for registration?
  • MOA and AOA/LLP agreement, including the incorporation certificate.
  • The firm/PAN LLP's card must be certified by the company director.
  • Proof of office location with a letter of authorization from the property owner
  • A bank statement and a cancelled check serve as proof of the company's bank account.
  • All directors must provide a passport-size picture, address, and evidence of identification.
  • The partners' statement of consent/board resolution
  • Certificate for the shop and the establishment
  • Payroll and attendance records are kept separately.
What are the advantages of Professional Tax?
Benefits of Professional Tax
  • Very easy to comply and follow the regulations of professional tax
  • Failure to pay this tax results in huge penalties
  • According to the rules and regulations of India, every employee is bound by the judiciary to obtain the registration of professional tax.
  • You can claim deductions in the salary on the basis of professional tax paid.
  • The local authorities and the state government have the right to collect professional taxes based on employment.
What is the registration process for the professional tax?
The registration process of professional tax varies from state to state.
1. Frequency to file returns
It is important to know the rules of the state before filing for a return because it depends on the state the person lives in.
2. Penalties
This tax is levied on all types of business entities. Delay in obtaining professional tax can lead to a penalty. In case of late payment of professional tax the penalty will be 10% of the amount of tax.
 3. Professional Tax Rate
The maximum amount payable p.a. is INR 2500. This tax is usually a slab amount based on the gross income of the professional.
4. Responsibility of Employer
The owner of a business is responsible for deducting professional tax from the salaries of his employees and paying the amount to the appropriate government department in the prescribed form within the specified time.
5. First day
Within the first working day, you need to provide your PAN details, address proof and identity proofs of all the directors/partners/proprietors of the company.
6. Second day
On the second working day the application form for professional tax will be filled by the employees and then submitted to the concerned authorities.
7. Seven days
Within seven working days, the basic acknowledgment will be given to you. In case the documents are complete, then the registration hard copy will be issued within 10 days in all major cities. Otherwise you need to submit your documents if missing as mentioned by authorities.
Who all are exempted from the Professional tax?
Exemptions from Professional Tax
  • Members of the armed forces including members of auxiliary forces or reservists serving in the state
  • Parents of children with a permanent disability
  • Individuals over 65 years of age
  • Physically challenged individual
  • Women engaged as agent in Mahila Pradhan Kshetriya Bachat Yojana or Director of Small Savings
  • Badli workers in textile industry

Required Documents

Acceptable DocumentDocument TypeAdditional Details
List of directors and passport size photographs ..
Attendance and salary register..
Board Resolution ..
PAN card of company/LLP..
Certificate of incorporation ..
Premises proof of company ..
Bank statement and cancelled cheque..

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You Ask, We Answer

Professional tax is calculated on the basis of salary slabs. The maximum amount under which tax can be levied on a person is Rs. 2500 per annum.
Self-employed people are responsible for covering their own tax obligations. Employers in cases involving individuals are responsible for withholding taxes.
States have different regulations regarding professional taxes. Each state can impose restrictions and rates because laws differ from one state to the next. However, the annual maximum limit has been set at Rs. 2500. States have different wage slab arrangements for the imposition of professional tax.
Yes it is necessary to pay professional tax otherwise there are penalties and fines in case of non-compliance.
Everyone who engages in any profession, trade, calling, or job actively or in any other way and who falls into one of the categories listed in the second column of the Schedule I attached to the profession tax legislation is responsible for paying the professional tax.

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