Professional Tax Registration Certificate and Compliance

Professional tax is a direct tax levied on persons earning an income by either practicing a profession, employment, calling, or trade. Unlike income tax imposed by the Central Government, professional tax is levied by the government of a state or union territory in India. In the case of salaried and wage earners, the professional tax is liable to be deducted by the Employer from the salary/wages, and the same is to be deposited to the state government. In the case of other classes of individuals, this tax is liable to be paid by the employee himself. The tax calculation and amount collected may vary from one State to another, but it has a maximum limit of Rs. 2500/- per year.

Professional Tax Applicability

This tax is levied on all kinds of professions, trades, and employment. Profession tax is applicable to the following classes of persons:

• An Individual
• A Hindu Undivided Family (HUF)
• A Company/Firm/Co-operative Society/Association of persons or a body of individuals, whether incorporated or not
• The professionals earning an income from salary or other practices such as a lawyer, teachers, doctors, chartered accountants, etc. are required to pay professional tax.

Professional Tax Applicable States across India

Please refer to the following table to know more about the states which impose professional tax in India:

Professional Tax Rate

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.

The Commercial Taxes Department of a state/union territory is the nodal agency that collects professional tax on the basis of predetermined tax slabs which vary for each state and union territory. The tax is calculated on the annual taxable income of the individual; however, it can be paid either annually or monthly.

Who Pays Profession Tax?

In the case of Salaried and Wage-earners, the Professional Tax is liable to be deducted by the Employer from the Salary/Wages, and the Employer is liable to deposit the same with the state government.

Self-employed persons who carry out their profession or trade on their own and fall in the ambit of profession tax are liable to pay the tax themselves to the state government.

Employer’s Responsibility for Professional Tax

The owner of a business is responsible for deducting professional tax from the salaries of his employees and paying the amount so collected to the appropriate government department. He/she has to furnish a return to the tax department in the prescribed form within the specified time. The return should include proof of tax payment. In case of not enclosing the payment proof, the register will consider the return incomplete and invalid.

Exemptions for Payment of Professional Tax

There are exemptions provided for certain individuals to pay Professional Tax under the Professional Tax Rules. The following individuals are exempted to pay Professional Tax:

• Parents of children with permanent disability or mental disability
• Members of the forces as defined in the Army Act, 1950, the Air Force Act, 1950, and the Navy Act, 1957 including members of auxiliary forces or reservists, serving in the State.
• Badli workers in the textile industry
• An individual suffering from a permanent physical disability (including blindness)
• Women exclusively engaged as agents under the Mahila Pradhan Kshetriya Bachat Yojana or Director of Small Savings.
• Parents or guardians of individuals suffering from a mental disability.
• Individuals, above 65 years of age

Professional Tax Registration Certificate and Compliance

Tax registration for professionals 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.

Application for professional tax certificate should be made to the assessed state tax department within 30 days of employing staff for his business.

If the assessee has more than one place of work, then the application should be made separately to each authority with respect to the place of work under the jurisdiction of that authority.

Due Dates for Professional Tax Payment

If an employer has employed more than 20 employees, he is required to make the payment within 15 days from the end of the month. However, if an employer has less than 20 employees, he is required to pay quarterly (i.e. by the 15th of next month from the end of the quarter).

Professional Tax Return

The Professional Tax Return is to be filed by all the persons who are subject to professional tax and the due dates for filing of such returns vary from State to State.

Benefits of Professional Tax Registration

• It is simple to comply with the Professional Tax Compliance, which results in a smooth registration process with minimum restrictions.
• It is compulsory to pay Professional tax as per the law. Hence, the timely payment of Professional tax can help avoid penalties and any punitive action against the Employer or a self-employed person.
• Professional Tax Compliance is simple, which can enable a smooth and hassle-free Registration Process.
• The Professional Tax acts as a revenue source for the state governments that helps the government to implement schemes for the various welfare and development of the region.
• The Employer or the self-employed person can claim a deduction on the previously paid professional tax.

Documents required for Professional Tax Registration

• Certificate of Incorporation / LLP Agreement
• MOA and AOA
• PAN Card of Company/LLP/Proprietor/Owner/Director
• NOC from the landlord, where the business is situated
• Passport size photos of Proprietor/Owner/Director
• Address and identity proof of Proprietor/Owner