Proffessional Tax

Info Archives Center

Professional Tax

Professional tax is a mandatory levy imposed by state governments in India on individuals earning income from professional services or employment. It's deducted from employees' salaries by employers and varies across states, aiming to generate revenue for state development and public services. It reflects on payslips alongside other salary components and underscores fiscal responsibility within India's tax system.

What is Professional Tax?

Professional tax is a statutory obligation imposed by state governments in India on individuals engaged in professional services or employment. This tax applies to various professionals, including but not limited to, lawyers, teachers, doctors, and chartered accountants, who earn income through their professions. For salaried individuals, employers are responsible for deducting the professional tax from their employees' salaries or wages and remitting it to the state government. However, for those not covered under salaried employment, such as self-employed professionals, they are required to pay the tax directly. The amount of professional tax and the method of calculation may differ from state to state, but there is a maximum cap of INR 2500 per year. This tax serves as a vital source of revenue for state governments and aids in funding various developmental initiatives and public services.

Professional Tax Registration and Returns

Professional Tax Registration in India is compulsory within 30 days of employing staff or commencing professional practice. Employers must deduct tax from salaries and remit it to the state tax department. For employers with over 20 employees, payments are due within 15 days from the end of the month; for those with fewer, it's quarterly by the 15th of the following month. Non-compliance can result in penalties. Professional advice can aid in navigating these obligations efficiently.

Professional Tax Applicable States Across India

The states which impose professional tax in India are listed below: (Click on the state name for more details)

Applicable States
Andhra Pradesh Assam Bihar Gujarat Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Manipur Meghalaya Mizoram Nagaland Odisha Puducherry Punjab Sikkim Tamil Nadu Telangana Tripura West Bengal

Not Applicable States
Central Arunachal Pradesh Chandigarh Chhattisgarh Dadra and Nagar Haveli Daman and Diu Delhi Goa Haryana Himachal Pradesh Jammu and Kashmir Ladakh Lakshadweep Rajasthan Uttar Pradesh Uttarakhand Andaman and Nicobar Islands

Exceptions

There are waivers provided for certain individuals to pay Professional Tax under the Professional Tax Rules.

The following individuals are exempted from paying Professional Tax:

Caregivers of children with enduring disabilities display unwavering dedication, advocating tirelessly for their children's needs despite facing complex challenges.
Individuals serving in the armed forces under the provisions outlined in the Army Act of 1950, the Air Force Act of 1950, and the Navy Act of 1957, along with members of auxiliary forces or reservists, who are currently stationed within the state.
Temporary workers in the textile sector.
An individual with a permanent physical disability, which may also include blindness, is eligible for certain considerations and accommodations under various legal provisions and social welfare programs.
Women who are solely employed as agents under the Mahila Pradhan Kshetriya Bachat Yojana or serve as Directors of Small Savings are eligible for specific considerations or benefits.
Legal guardians or parents of individuals facing mental disabilities.
Individuals aged 65 years and above.

Who Bears the Responsibility of Deducting Professional Tax?

It falls upon the employer's shoulders to withhold professional tax from their employees' salaries and subsequently remit the collected sum to the relevant state authority. This duty includes submitting a return to the tax department within the stipulated timeframe, accompanied by evidence of tax disbursement.

Professional Tax in India

In India, the highest limit for Professional Tax levied by any state stands at INR 2500/-. Under the Income Tax Act, the entire amount paid as Professional Tax throughout the year is eligible for deduction. This tax serves as a vital revenue stream for state governments, facilitating the execution of various welfare and developmental initiatives within their jurisdictions. Typically, employers deduct Professional Tax from the salaries of their employees and remit it to the state government. Alternatively, individuals not covered under salaried employment make direct payments to the government or through designated local bodies authorized for this purpose.

Ramifications

1. Inability to Obtain Registration.

Penalties will be imposed for the duration that he operates without completing the registration process.

2. Non-remittance to Government/ Delayed Deposits.

A penalty will be imposed for the duration in which he operates without completing the registration process.

3. Failure to Remit Funds.

Authorities possess the authority to retrieve the outstanding amount, along with relevant penalties and accrued interest, from the assets of the individual in default. Furthermore, they retain the ability to place a hold on the individual's bank account. In severe instances, legal action in the form of a prosecution case may also be initiated.