A professional tax can be defined as an indirect tax levied by the government of a state on all individuals who earn income from salaries or practice professions such as chartered accountants, company secretaries, lawyers, doctors, etc. Individuals who earn income must pay this professional tax. This type of tax must be paid by all individuals. Its calculation and amount vary from state to state. The limit has been set at Rs. 2500 per year, however.
Since the professional tax is levied by the state government, it tends to differ for various states. Each state declares a slab and deducts professional tax based on these slabs. It is, however, not mandatory for all states and union territories in India to pay professional tax. There are 12 equal instalments due for the annual professional tax, each of which must be paid every month. February is the only month that charges a higher tax than the other months.
It is a State tax that is levied on the basis of the infrastructure it provides to its citizens so that they can carry out their professions in that state. The first form of tax was levied in 1949 by the Constitution of India under Article 276, which states that a tax shall be levied and collected on professions, trades, callings, and employments in accordance with this Act. There are two types of professionals who are subject to the professional tax. It’s collected by the Commercial Tax Department of the respective state.
In general, employers (Company, Firm, LLP, etc.) who employ people and pay taxes on their behalf are called registered persons since they must register themselves. Generally, registered persons pay tax monthly, but some states do it annually, half annually, or quarterly.
People who work independently are called enrolled people. For example, freelancers, businessmen, doctors, contractors, estate agents, etc. Enrolled people are those who pay their own taxes because they must enroll themselves. Enrolled individuals generally pay their taxes in a lump sum, but in some states, the tax period is pt registration online
The Following Points Are Important:
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The taxation of sources of income from different sectors may also be separate in some circumstances. As an example, an individual operating a transport business in some states may be required to pay a professional tax of about Rs. 50 for every vehicle that he owns. This may be subject to a cap of Rs. 1,000.
In addition to obtaining a registration certificate, employers may also be required to obtain an enrolment certificate if they are carrying on a trade or profession. To understand this, let’s consider Mr. A, a business owner with employees, in this case, he will register himself to pay tax on the behalf of his employees, and at the same time, since he is carrying on a business/profession, he will enroll himself to pay tax.
There Are Several Types of Compliances Covered by the Professional Tax Act and Its Rules:
- A registration/enrollment process
- The payment of taxes
- A return must be filed
- Workplace display of registration or enrollment certificates
Let’s figure out professional tax laws and regulations since it is levied by states. At present, only 19 states have professional tax laws and regulations.
Taxes on Professional Services Are Imposed in the Following States:
- An act to tax professions, trades, callings, and employments was passed in 1987 in Andhra Pradesh.
- The Assam Professions, Trades, Callings, And Employments Taxation Act of 1947 applies to Assam.
- It enacts the Bihar Tax on Professions, Trades, Callings and Employments Act, 2011, which is applicable to Bihar.
- There is a professional tax law in Chhattisgarh (Chhattisgarh Profession Tax Act 1995), but everyone has been exempted from this act as of 1st April, 2011 by Notification No. F-10/22/2011/CT/V(22) dated 31/03/2011. Thus, the Professional Tax is not currently in effect in Chhattisgarh.
- State Tax on Professions, Trades, Calling,s and Employments of Gujarat (Gujarat Panchayats, Municipalities, Municipal Corporations Act, 1976)
- In Jharkhand, there is a law entitled “Jharkhand Tax on Professions, Trades, Callings, and Employments Act 2011”
- The Karnataka Tax on Professions, Trades, Calling,s and Employments Act of 1976 applies to this state.
- As for Kerala, professional tax is levied as a rural and urban tax. In rural areas, it is levied under the Kerala Panchayat Raj Act 1994, while in urban areas, it is levied under the Kerala Municipality Act, 1994.
- Madhya Pradesh:-(Vritti Kar Adhiniyam, 1995)
- In Maharashtra, the Maharashtra State Tax on Professions, Trades, Callings, and Employments Act of 1975 regulates taxes on occupations.
- It enacts a taxation act featuring the professions, trades and callings of Manipur residents.
Frequently Asked Questions
Is professional tax mandatory?
Professional tax is mandatory for salaried individuals.
Why do professional taxes differ from state to state?
In most states, the professional tax is a state-imposed tax, so it differs from one state to another. Each state declares a slab for professional tax deductions, and based on these slabs, the tax is deducted.
Is professional tax applicable to Union territories?
A Union Territory is a small region of the country, which typically generates less revenue than a state. Therefore, professionals working there are not subject to professional taxation.
Which state levies the highest professional tax?
It is possible to deduct 2,500 rupees per year from your salary as professional tax paid by a state.