If you check your pay statement, you’ll see a breakdown of your basic wage as well as a tiny reduction. This is referred to as a professional tax. The amount of this tax varies from state to state.

Many salaried employees in India have no idea what a Professional Tax is. And why does it appear as an income deduction on their Form 16 or pay stubs? This post will look at Professional Tax, Professional Tax payment online, Professional Tax deduction, and other information on Professional Tax on salary.

What is professional tax?

A professional tax is a state government tax levied on all individuals who earn a living through whatever medium. This is not to be confused with the definition of professionals, which refers to persons such as doctors. This is a tax that must be paid by everyone who earns money. The calculation and amount collected vary by state, however, there is a cap of Rs. 2500 per year.

Who levies it?

A professional tax is a state government tax levied on all individuals who earn a living through whatever medium. This is not to be confused with the definition of professionals, which refers to persons such as doctors. This is a tax that must be paid by everyone who earns money. The calculation and amount collected vary by state, however, there is a cap of Rs. 2500 per year.

In which state Professional Tax is applicable

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

In which state Professional Tax is not applicable

  • New Delhi
  • Arunachal Pradesh
  • Chandigarh
  • Chhattisgarh
  • Dadra & Nagar Haveli
  • Daman & Diu
  • Haryana
  • Lakshadweep
  • Jammu & Kashmir
  • Rajasthan
  • Uttaranchal
  • Uttar Pradesh

Who collects professional taxes?

The Commercial Tax Department of each state collects the professional tax, which eventually ends up in the municipal corporation’s treasury. Employers collect professional tax from the monthly salaries in the case of employees. The tax is then paid to the government. However, if they fail to pay this tax on time, they will face penalties for failing to collect the professional tax or pay it to the government.

Individuals who work for themselves must pay this tax. Furthermore, professionals who are no longer employed must register for it using a form. When the form is accepted by the appropriate authorities, a registration number will be generated, which will allow them to pay the tax.

What Are the Professional Tax Exemptions?

Individuals that are exempt from professional tax are listed below.

  • Individuals serving in the Central Para Military Force (CPMF)
  • Ex-servicemen
  • Individuals who have a 40% disability. They must submit the required certificate here.
  • Individuals who are deaf, stupid, or blind earn a living.
  • Individuals in charge of educational establishments that educate children up to the 12th grade.
  • Civilian non-combatant or combatant Armed Forces personnel.
  • Individuals have a permit to operate a single three-wheeler or taxi for the purpose of transporting goods.
  • Technicians from several countries are hired by their respective countries.

The Implications of Professional Tax Regulation Violations

While the actual amount of the penalty or penal interest varies by state, all of these states may charge a penalty for failure to register once Professional Tax legislation is in place.

There are additional penalties for failing to make a payment on time and failing to file a return on time. In Maharashtra, for example, there is a penalty of Rs 5 per day for late registration, 1.25 percent interest per month for late payment, a penalty of 10% of the amount of tax in case of late/non-payment of Professional Tax, and a penalty of Rs 1000 – Rs 2000 for late filing of the return.

Who is in charge of deducting Professional Tax (PT)?

In the case of salaried employees, the employer is responsible for deducting their PT. Other individuals who are not salaried employees, on the other hand, must pay their own taxes. As previously said, such people include professionals, freelancers, traders, merchants, and others.

According to Article 246 of the Indian Constitution, only Parliament has the authority to pass legislation through the Union List. Income taxes are included on the Union List. The Concurrent and State lists, on the other hand, are under the competence of the State government. Similarly, the State government is responsible for collecting and changing professional taxes. As a result, after deducting an employee’s PT, the company must submit it to the State government.

Considerations for Professional Taxation in India

  1. When it comes to employees, an employer is responsible for deducting and remitting Professional Tax to the state government, subject to any monetary thresholds established by state legislation.
  2. Individuals who conduct a freelancing business without employing anyone must also register, subject to any monetary thresholds established by the specific State’s legislation.
  3. An employer (for example, a corporation, a partnership, or a sole proprietorship) who is also a person carrying on a trade or profession is required to pay Professional Tax on that trade or profession, subject to any monetary thresholds specified by the respective State’s legislation.
  4. To pay Professional Tax on his trade/profession and deduct the tax from his employees, the employer must register and get both a Professional Tax Registration Certificate and a Professional Tax Enrolment Certificate. Furthermore, depending on the requirements in each state, each office may require separate registration.

How Can I Pay My Professional Taxes Online?

The professional tax payment procedure is simple. You must first choose a state in this case. If you are a working person in Karnataka and want to pay this tax online, you must follow the steps outlined below.

Step 1: Visit the official website portal for paying professional tax.

Step 2: Choose between self-employed professionals and registered employees on the new website. Assume you’ve chosen a registered employee.

Step 3: Provide your Professional Tax Registration Number, company or firm name, and other pertinent information. Choose whether your payment will be made monthly, yearly, or as stated. Choose the year and month for which you want to make the payment. Also, insert the tax and penalty amounts (if any).

Step 4: Enter your bank information and cell phone number. After entering your information, click ‘Enter,’ and then ‘Submit.’

Step 5: Select ‘Click here for Payment.’ Then, using your credentials, log in and pay professional tax.

Keep the challan for future use.

In most cases, employers handle the registration process. Within thirty days of hiring a new employee, businesses register for professional tax registration with the state tax department. If a company has more than one location, applications must be submitted to the appropriate authorities separately.

If you are an employer or a professional wanting to register for tax, PhoenixTax- Tax consultant in Tambaram, Chennai can make it simple for you. Our tax experts will handle the entire process for you.