Professional Tax

Professional Tax is a state-level tax that applies to salaried employees and professionals, including chartered accountants, lawyers and doctors. 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. This tax needs to be deducted from the salary or wages paid

What is Professional Tax?

Professional Tax is a tax levied on professions and trades in India. It is a state-level tax and has to be compulsorily paid by every member of staff employed in private companies.

Applicability of Professional Tax as per the Constitution of India:

Article 276 of the Constitution of India lays down that "there shall be levied and collected a tax on professions, trades, callings and employments, in accordance with the provisions of this Act. Every person engaged in any profession, trade, calling or employment and falling under one or the other of the classes mentioned in the second column of the Schedule shall be liable to pay to the State Government tax at the rate mentioned against the class of such persons in the third column of the said Schedule. Provided that entry 23 in the Schedule shall apply only to such classes of persons as may be specified by the State Government by notification from time to time."

What is the Amount of Professional Tax?

The maximum amount payable per annum towards professional tax is INR 2,500. The professional tax is usually a slab-amount based on the gross income of the professional. It is deducted from his income every month.

Monthly salaries or wages	Tax Rate
Up to Rs. 15,000	Nil
Rs. 15,001 to 20,000	Rs. 150 per month
Rs. 20,000 and above	Rs. 200 per month

In Which States is Professional Tax Applicable?

The state governments of the following states have levied professional tax – Telangana, Karnataka, West Bengal, Andhra Pradesh, Maharashtra, Tamil Nadu, Gujarat, Assam, Chattisgarh, Kerala, Meghalaya, Orissa, Tripura and Madhya Pradesh

Who is responsible to deduct Professional Tax?

• The owner of a business is responsible to deduct professional tax from the salaries of his employees and pay the amount so collected to the appropriate government department.
• He has to furnish a return to the tax department in the prescribed form within the specified time.
• The return should include the proof of tax payment. In case the payment proof is not enclosed, the return shall be deemed incomplete and invalid

How To Register for Professional Tax?

• Apply for the Registration Certificate to your state’s tax department within 30 days of employing staff for your business
• If you have more than one place of work, apply separately to each authority as regards the place of work coming under the jurisdiction of that authority

Penalties for Non-Compliance on Professional Tax Payment:

• Delays in obtaining Registration Certificate, a penalty of Rs. 5/- per day
• In case of non/late payment of profession tax, penalty will be 50% of the amount of tax
• In case of late filing of returns, a penalty of Rs. 300 per return will be imposed