Taxation for professionals
In the payslips/Form 16 issued to salaried individuals who work and earn a monthly income, the term ‘professional tax’ is often referred to. Professional tax is deducted from salary income, but why? Here, you’ll find information about professional tax, including its slab, online payment, and frequently asked questions.
A salaried individual who works and earns a monthly income is obliged to pay professional taxes to the respective state governments. P tax, also known as income tax, is reflected on an employee’s salary slip as well. In addition to salaried employees, professionals can pay it directly to the state government. Employers deduct this tax directly from an employee’s monthly income before handing out the employee’s remuneration. The income tax returns Act 1961 also allows for the deduction of this tax paid during the financial year. Where is Professional Tax Applicable? The amount of professional tax varies from state to state in India since the state government decides its quantum. As a result, a Gujarati employee will not be taxed the same amount as a Maharashtra employee. Self-employed individuals, such as chartered accountants, doctors, lawyers, and others also need to bear the professional tax. However, in these cases, the professionals will be responsible for paying their own taxes. Tax rates are determined by the individuals’ income and state of p tax registration
What is the Professional Income Tax Limit?
The professional tax was introduced in 1949. There was a limit of Rs.250 for this tax at that time. However, in 1988, the limit was raised to Rs.2500.
- The exact liability, however, depends on the employee’s income slab and state of employment. Professional tax for a month, however, cannot exceed Rs.2500 regardless of these two factors.
Who Levies Professional Tax? However, professional taxes are an exception to the rule set forth in Article 276 of the Indian Constitution, which gives Parliament the power to make decisions and laws about taxes on an individual’s income. In spite of the fact that all states are permitted to impose this tax, not everyone does so. The following table highlights the states where this tax is applicable and where it is not.
|
States Where P Tax is Applicable |
States (and UTs) Where P Tax Does Not Exist |
|
Gujarat |
JammuKashmir |
|
Madhya Pradesh |
Uttarakhand |
| Bihar |
Punjab |
|
Jharkhand |
Haryana |
| West Bengal |
Delhi |
|
Sikkim |
Uttar Pradesh |
| Meghalaya |
Rajasthan |
|
Assam |
Arunachal Pradesh |
| Tripura |
Daman & Diu |
|
Nagaland Dadra |
Nagar Haveli |
| Manipur |
Goa |
|
Mizoram |
Lakshadweep |
|
Orissa |
AndamanNicobar Islands |
| Chhattisgarh |
Himachal Pradesh |
Who collects PT?
In general, the Commercial Tax Department collects this tax. Individuals employed by a firm or business do not need to pay this tax separately since it has already been deducted by the employer and cleared on their behalf. Additionally, employers who are individuals, rather than entities, are also liable to pay professional taxes on professions or trades. In order to pay and charge taxes, employers need to obtain two certificates.
Occupational tax registration certificate – This document certifies your business or trade is paying professional tax.
A certificate of professional tax enrolment is another document that permits an employer to deduct professional taxes from its employees for the purpose of clearing the state’s liabilities.
Other certificates and registrations may be required as well, depending on the state’s legislation and guidelines. It is possible, however, for certain categories of professionals, that the state may waive professional tax liabilities. In Karnataka, blind individuals working and earning within the state are exempt from such tax liabilities. It is the responsibility of self-employed individuals to pay professional taxes, similar to professional taxes payable to employees, under the Professions, Trades, Callings, and Employments Act of 2000. Unlike employees, self-employed individuals are also required to pay professional taxes. There is only one difference, in this case: self-employed individuals are responsible for paying this tax. A number of self-employed professionals, including physicians, technology experts, chartered accountants, medical professionals, and freelancers, are required to pay professional tax. The first thing that they require in this regard is a professional tax registration number. Once it is obtained, one can choose to pay professional tax online or offline.
Methods offline
Table of Contents
In order to clear their outstanding taxes, taxpayers must submit the appropriate professional tax form along with the outstanding amount.
Method of online payment
A professional tax portal in the state where the business is located would require the taxpayer to register online. This should provide the taxpayer with a registration number. A person can clear their professional taxes online after the details have been verified and a certificate has been issued. They can use a debit or credit card or internet banking to pay. The online portal is easier to use, and saves time. To pay the amount, one doesn’t have to physically visit the tax office, and simply transfers the outstanding funds with a click. In the event a person or business fails to pay their professional tax on time, they may face penalties. There are many different penalties for late payment, but they vary from state to state. As a result, businesses that fail to register on time and obtain professional tax registration certificates and enrolment certificates are also penalised. In addition, a person may face heavy penalties if he/she misleads the state government with inaccurate information about their business, which varies from state to state. An individual’s professional tax burdens can be increased three times by misinformation on his or her registration or enrolment certificate under Section 5(6) of the Profession Tax Act. You should therefore double check all your details when applying for one of these professional tax certificates before applying. Professional tax payments can be cleared in advance by businesses and individuals, as well as continuing to pay them every month. A prepayment of professional taxes can be highly beneficial, as some states offer discounts and rebates in such cases. Nonetheless, one must be extremely familiar with the various slabs of the state where his/her business is located or where he/she works.
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