State governments levy a tax known as the “Professional Tax” on companies with a professional focus. A person is obligated to pay professional tax if they receive remuneration from their profession, such as Chartered Accountants, Company Secretaries, Lawyers, etc. Employers, professionals, traders, etc., are included in the registration’s scope of application.

This tax is subtracted from the employee’s salary, which can then be deducted from the calculation of taxable income. Employers and company owners acquire registration from the Municipal Corporation with respect. The tax rate and registration process differ because it is a state-based registration. Additionally, there are two other registration types: PTRC registrations and PTEC registrations.

Who is liable for paying professional taxes?

Employer (corporate, partnership firms, sole proprietorship, etc.) is also a person carrying on trade or profession and is required to pay professional tax on his or her trade or profession again subject to the monetary threshold if any provided by the respective State’s legislation in the case of employees.

To whom does the Professional Tax not apply?

  • Parents of children who have a mental or permanent disability.
  • Armed services personnel serving in the state, including reserve or auxiliary personnel.
  • Those who are over 65.
  • A person with physical disabilities (also visually challenged).
  • Under the Mahila Pradhan Kshetriya Bachat Yojana or Director of Small Savings, agents are only women.
  • Parents or guardians of people with mental disabilities
  • Badli textile industry workers.

Professional Tax Certificate Types

Below is a list of the many categories of professional tax certificates:

PTEC (Professional Tax Enrolment Certificate) (Professional Tax Enrolment Certificate)

Through this certificate, the business entity, such as a Private/Public Limited Company, owner, or professional, such as a Sole Proprietor or Director, etc., pays this form of professional tax.

PTRC: (Professional Tax Registration Certificate) (Professional Tax Registration Certificate)

Here, the employer, whether public or private, withholds tax from the employee’s pay and pays it to the government.

Benefits of professional tax registration

Below are some advantages of professional tax registration:

  • Professional Tax Compliance is easy to follow, which leads to a quick registration process with few constraints.
  • According to the law, paying professional tax is required. Therefore, paying professional tax on time might help the employer or a self-employed person avoid fines and other negative consequences.
  • Simple professional tax compliance might lead to a straightforward registration process.
  • The Professional Tax serves as a source of income for state governments, which enables them to put plans in place for the varied welfare and development of the area.
  • The professional tax that has already been paid may be written off by the Employer or the self-employed individual.

Required Documents for Professional Tax Registration

  • MOA, LLP Agreement, Certificate of Incorporation, and PAN Card of the company, LLP, proprietor, owner, or director from the landlord where the business is located
  • Proprietor/Owner/Director address and identity in passport-size pictures evidence of proprietorship, ownership, or directorship information about personnel and salary paid
  • Additional licenses and registrations.

Penalties Associated With Registration for Professional Taxes

  • For breaking the professional tax regulations: If professional tax regulations are broken, a penalty of 2% per month for the payment delay is levied. A 10% extra fee is charged in the event of additional payment delays.
  • Delay in receiving the certificate of enrollment: Such delays result in a Re.2 per day penalty. The 3 times the sum due is payable in the form of a penalty if the information given to acquire the Certificate of Enrolment was inaccurate or incorrect in any other way.
  • For each such late return, a particular state has imposed a fine of Rs 300.

Who is in charge of withholding and paying professional tax?

If there is a professional tax threshold set by the state’s professional tax act, the employer is the one who must deduct and pay the tax to the government on behalf of the employee.

Employers that are also people engaging in a trade or profession (corporations, partnership firms, sole proprietorships, etc.) are required to pay professional tax on that trade or profession as well, again subject to the financial threshold, if any, provided by the respective State’s Professional Tax Act.

In this situation, the employer must register and get both a Professional Tax Registration Certificate and a Professional Tax Enrolment Certificate in order to be able to collect the tax from his staff and pay it to the government. Moreover, depending on the laws of each State, separate registration may be necessary for each office.

People who operate a freelance business without hiring any workers must also register for professional tax, subject to any applicable monetary thresholds set forth by the laws of the individual States.

How to Register for Professional Taxation

State-by-state variations exist in the Professional Tax Registration process. Returns must also be filed at predetermined periods based on the needs of the State. Employers and professionals seeking professional tax registration must follow the steps listed below.

Step 1: Filing the Application with the Required Documents.

The application form and required paperwork must be submitted by the applicant.

Step 2: Provide the Application to the Affected State Government & Tax Department.

The applicant must submit the application to the appropriate state government together with all required paperwork. The tax department should also receive a copy of the same.

Step 3: Examining the Application by the Tax Authority:

After receiving an application, the tax authority must examine it to make sure that the information is accurate.

Step 4: Issue Of Registration Certificate

Following a satisfactory review of all the documents, the authorities will issue the Registration certificate.

Our Phoenixtax- Tax consultants in Chennai are always available by phone if you have any inquiries about professional tax registration.