Professional Tax is a tax which is levied at the state level in our country. People who practice a profession of a Chartered Accountant, Cost Accountant, Lawyer, Company Secretary, Doctor or are a Businessperson/Merchant and earn through such professions are liable to pay professional tax in some states of the country.
Out of the 29 states and 7 union territories, some of the states which currently impose professional tax in India are Karnataka, Tamil Nadu, Bihar, Andhra Pradesh, Maharashtra, Assam, Kerala, Telangana, Gujarat, Meghalaya, Odisha, Madhya Pradesh, West Bengal, Tripura and Sikkim. As aforementioned, businesspersons, individual workers and merchants come under this tax’s ambit.
Professional tax is levied by the Municipal Corporation/ authority of any state and union territory. It is levied through predetermined tax slabs and is paid on monthly basis. It is payable by private company employees or may also be payable by people who earn salary in general.
Article 276 of the Indian Constitution describes that the Professional Tax shall be imposed as a tax on professions, trades, callings and employments. It also remarks that each individual who is engaged in any profession/trade/calling/employment and lying under one or the other classes mentioned in the article’s schedule shall be a party to this tax and shall be liable to pay the tax to the State government at a preannounced rate mentioned in the article’s schedule.
Professional Tax has a slab based structure and it is dependent on the gross income of the professional or the salaried employee who is paying said tax. It is deducted monthly from each individual employee’s salary. If the professional in question is a director or a partner of a company, then the said tax is deducted after the gross turnover of the company has been calculated and the said employee’s annual earning is clear. However, in states such as West Bengal the payment of professional tax is not dependent on the employee’s company’s turnover.
A company’s or a business’s management is responsible for the deduction of professional tax from their employees’ salaries. They are also liable to forward the said collected amount of professional tax to the relevant government authority or department. Every employee whose professional tax has been deducted has to mention the said deduction in their Income Tax Return Form mandatorily.
The companies and businesses which come under the ambit of the State Government are liable to pay Professional Tax. Moreover, this tax shall be submitted by them to the State Government’s treasury through Bank Challan. Employers can also pay this tax at other places designated by concerned authorities for this purpose.
Also, employers should know that if they have more than 20 personnel, then their employees’ professional tax payment should be made within 15 days after the preceding month’s end. However, if the employer has less than 20 employees, then the professional tax payment can be done to the authorities on a quarterly basis or to be precise within 15 days from the end of each quarter.
If you do not pay your professional tax on time and as per schedule, you or the employer shall be subjected to a penalty. Penalty can be as high as 10% of the amount of professional tax. Penalties on late filing of returns also exist and they can go up to Rupees 2,000.
Professional Tax is levied on income earned through profession, trade, calling and employment. It is levied by the state governments. It was introduced in 1949 and the right to levy this tax is given to states through the Clause (2) of Article 276 of India’s constitution.
This tax is like Income Tax with the only difference being that the Income Tax is levied by the Central Government and the Professional Tax is levied by the State governments. In the beginning, the maximum professional tax that could have been collected by the state governments was Rupees 250 however this amount was raised to Rupees 2,500 in the 1980s’.
In recent times there is a demand amidst the state governments asking for an increase in the higher limit of the professional tax amount. The state governments are demanding to raise this ceiling amount from Rupees 2,500 to Rupees 7,500. However, this case is still pending and the relevant constitution article amendment has not taken place.
Professional Tax deduction as an Income Tax is carried under the Section 16 of the Income Tax Act. For salaried employees and wage earners, the professional tax has to be deducted from the employee/wage earner’s salary by their employers and has to be deposited to the state government. However, when it comes to other individuals, the person who classifies as a professional holds the responsibility for submission of his professional tax to the state government. This tax is mostly collected by the state governments, however sometimes this tax is also collected by the Panchayats or the local bodies of a state. In case, a Panchayat plans to collect Professional Tax, it should be an active entity under the state government’s purview.
Employers/Individual Professionals who come under the ambit of this tax are liable to register themselves as a Professional Tax payer by filling out the relevant form. As aforementioned, different states levy different rates of Professional Tax.
As mentioned, professional tax rates are different in different states. Let’s go through some of these states one by one to understand how this tax is levied across them:
Maharashtra Professional Tax:
The Maharashtra State tax act came into effect in the month of April, 1975. The Professional Tax slabs for salaried and wage earning individuals in this western Indian state are as follows:
- If your salary is less than Rupees 7,500 per month, then you don’t have to pay any Professional Tax in the state of Maharashtra.
- If your salary is greater than Rupees 7,500 per month and less than or equal to Rupees 10,000, then the amount payable in Maharashtra under Professional Tax slab is Rupees 175 per month.
- If your salary is greater than Rupees 10,000 then the amount payable in Maharashtra under Professional Tax slab is Rupees 300 for February and Rupees 200 for all months except February.
The above described Professional Tax slab rates are for salaried individuals and wage earners. However, if you want to know about the Professional Tax which is charged to all the other class of individuals, you can visit this web page link:-
Moreover, the government of Maharashtra has also launched a composition scheme under which any person who is liable to pay Professional Tax in the state can make a one-time payment of Rupees 10,000 to the state government. This payment will be valid for 5 years as it has been made against Rupees 2,500 per annum payment.
You shall also note that the interest charged for late payment of Maharashtra State Professional Tax is 1.25% per month and the state authority is also free to impose a penalty on the defaulter. The penalty can be to the tune of 10% on the total tax due.
Karnataka Professional Tax:
Professional Tax under Karnataka state for salaried employees and wage earners follows the below mentioned rules:
- If the monthly salary of a salaried individual or a wage earner is less than Rupees 15,000 then he/she doesn’t have to pay any professional tax to the state of Karnataka.
- However, if the monthly salary of a salaried individual or a wage earner is more than Rupees 15,000 and more, the individual will have to pay Rupees 200 per month to the Karnataka state.
For taxpayers other than salaried individuals and wage earners, Karnataka state has a slab based tax rate for payment of Professional Tax. Those rates are mentioned at this web-page link:
Again, for late payment of Professional Tax in Karnataka, 1.25% interest will be charged and a 50% penalty on total amount due can be charged.