There are different types of tax that are levied on an earning person by the Government of India, namely the Income Tax, Education CESS and Professional Tax. Many might be some other kind of taxes which are applicable in specific circumstances.
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What is professional tax?
Professional tax in our country is a state level duty to be paid by salaried individuals, merchant dealers or anyone in a profession like chartered accountant, doctor, lawyer, etc. Since it is imposed at a state level, different states have different rates and methods of calculating the professional tax. Currently, these states levy professional tax: Karnataka, West Bengal, Andhra Pradesh, Maharashtra, Tamilnadu, Gujarat, and Madhya Pradesh.
This tax first came into existence in 1949 and the power has been vested with the State Government to levy this tax as per Clause (2) of Article 276 of the Constitution of India. The amount of this tax also depends on the gross income slab of the person. The professional tax is something similar to income tax, but income tax is collected by the Central Government while professional tax is collected by the State Government.
For the first time the maximum professional tax collected was Rs250, which later increased to Rs2500 by 1988. Though there have been petitions to increase the maximum limit of the professional tax by the State Government, the court has declined and kept the maximum limit same. The professional tax is deducted as per Section 16 of the Income Tax Act.
The money collected through professional tax is spent by the government for the payment of unemployment allowance.
When professional tax is paid?
For salaried individuals and wage earners, professional tax is deduced from their salary every month by their employer and sent to the local municipal corporation. For others, it needs to be paid by themselves on a monthly basis.
How is professional tax paid?
The owner of a business is responsible for paying the amount collected after deduction from employee salaries to the appropriate government department. The return to the tax depart needs to be furnished by the owner in the prescribed form within the specified time. The return includes the proof of tax payment. In case the payment proof is missing, the return will be considered incomplete and invalid.
Every person liable to pay professional tax (either on his behalf or om behalf of his employees) needs to apply for Professional Tax Registration to the prescribed authority within 30 days of employing staff in the business. In case the business has multiple locations of operation, registration needs to be done separately for each according to the jurisdiction of that authority.
While the professional tax of salaried employees is directly deducted by the employer from salary, the self employed and professionals need to get a registration number from the sales tax offices of their respective district and then fill up a challan in their banks, mentioning the registration number.
These days, many states such as Andhra Pradesh, Gujarat, Madhya Pradesh, Orissa and West Bengal have facilitated online payment of professional tax, making the process convenient and hassle free.
Non payment of Professional Tax
Delay, non-payment or late payment of professional tax can lead to penalties. The penalty for delay can be as low as Rs5 per day, whereas non/late payment can lead to about 10% of the amount of tax to be charged as penalty.
Professional Tax Slabs
As mentioned earlier, the amount of tax depends on the salary slab and also the state of employment.
For example the professional tax in Karnataka is calculated as under:
Upto Rs.9,999/- Nil
Rs.10,000/- to Rs.14,999/- Rs.150/-
Rs.15,000/- and above Rs.200/-
Wheras in West Bengal, it is calculated as under:
Rs. 8500 or less Nil
Rs. 8501 or more but less than Rs. 10001 Rs. 90 p.m.
Rs. 10001 or more but less than Rs. 15001 Rs. 110 p.m.
Rs. 15001 or more but less than Rs. 25001 Rs. 130 p.m.
Rs. 25001 or more but less than Rs. 40001 Rs. 150 p.m.
Rs. 40001 and above Rs. 200 p.m.
To know the latest professional tax rate slabs, calculations and notifications for each state, you can visit these sites:
Andhra Pradesh – www.apct.gov.in/apportal
Gujarat – www.commercialtax.gujarat.gov.in
Madhya Pradesh – www.mptax.mp.gov.in
Maharashtra – www.mahavat.gov.in/Mahavat
Karnataka – www.ctax.kar.nic.in
Orissa – www.odishatax.gov.in
Tamil Nadu – www.tn.gov.in
West Bengal – www.wbcomtax.nic.in