Everything one should know about Professional Tax

Everything one should know about Professional Tax

Do you ever study the deduction breakup whenever you obtain your salary? You may get across the professional tax at the head. Don’t get it confused with income tax, professional tax is something entirely different.

However not all Indian States impose Professional tax, those who does include it are Andhra Pradesh, Assam, Bihar, Gujarat, Karnataka, Kerala, Madhya Pradesh, Meghalaya, Orissa, Sikkim, Tamil Nadu, Telangana, Tripura, West Bengal, Maharashtra, Jharkhand, Manipur, Mizoram and Chhattisgarh.

In this article, we will tell you the complete understanding of Professional Tax and its Compliances.

So, what is Professional Tax?

Unlike the word says, professional tax is not just a tax levied on professionals. This tax is levied on any person earning a living through work, employment trade or calling. Professional Tax is a state tax that a state government imposes on account of the infrastructure it provides to you so that you can carry out your profession in that State.

As provided for in Clause (2), Article 276 of the Indian Constitution, State Governments are granted the right to levy and collect the professional tax. Most Indian states have also opted to not exercise this right. This tax is levied in all other States where appropriate, based on professional tax slab rates as implemented by the respective states. Neither state will, however, charge professional tax on any taxpayer over 2,500. Professional tax payment is permitted as a taxable income deduction under the Income-Tax Act, 1961.

To salaried employees, the employer deducts professional tax and is charged to the State Government’s concerned department. To pay the professional tax self-employed people need to receive a ‘ Certificate of Enrolment ‘ from the State authority in question.

Professional Tax slabs

Like any other tax Professional Tax also has slabs, and all of an organization’s paid employees and qualified professionals fall within its various categories.

Professional tax slabs are based on predetermined slabs and on the salary or monthly level of income. It is usually around Rs.200 a month with Rs. 2500 being the maximum payable in one year. The employer who is responsible for depositing it with the relevant government office deducted this balance from the employee’s salary.

Professional Tax is not only for those who get a salary, any individual who is not working in an organization but still earn, is responsible for paying Professional Tax.

Professional Tax Compliance

Any professional who has monthly income above a certain level has to professional tax. Since the rates of professional tax depend on states to states, it is mandatory to be aware of the rates in your particular state.  Usually, a penalty is imposed on a taxpayer if they fail to register for professional tax. There are also penal provisions for non-payment of professional tax and for failure to file the return within the due date.

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