A guide to the Taxpayer – What is Professional Tax? And Who is eligible to pay Professional Tax Rate?

Many salaried employees in India are unsure what is a Professional Tax? And why does it appear as a deduction from income on their Form 16 or pay slips. We will look into the Professional Tax, Professional Tax payment online, Professional Tax deduction, and other information on Professional Tax on salary in this article.

What is a Professional Tax?

Professional Tax is not a tax imposed just on professionals, as the word implies. Any person who earns a living through a profession, employment, trade, or any other way through which they earn an income is subject to this tax. The right to impose and collect Professional Tax is granted to the State Government under the provisions of Clause (2) of Article 276 of the Indian Constitution.

Similarly, many Indian states have chosen not to exercise this right. This tax is charged in all other states where it is appropriate, based on Professional Tax slab rates enacted by the individual States. No state, however, can impose a Professional Tax on any taxpayer over 2,500 INR. According to the Income Tax Act of 1961, Professional Tax payments can be deducted from taxable income.

Professional Tax is deducted by the employer and paid to the State Government’s responsible department for salaried personnel. To pay the Professional Tax, self-employed individuals must obtain a ‘Certificate of Enrolment’ from the relevant State body.

Information on Professional Tax Payment Online in Mumbai  

• If you need to pay for a Professional Tax Registration Certificate (PTRC), go to the Mahavat website and click on the e-payment link. If you need to pay for a Professional Tax Enrolment Certificate (PTEC), go to the Mahavat website (Government Portal for Professional Taxpayer in Maharashtra) and click on the Precept e-payment link.
• Select e-payment after logging in with your TIN.
• An MTR Form No. 6 Challan must be displayed. By default, it will include the TIN and the dealer’s name.
• Choose the type of e-payment (PTEC, PTRC, etc. ), the payment period, the amount being paid, and the location under which you are registered. Remember that for the form to be accepted, each field must be filled out.

Points to keep in mind related to Professional Tax in India

• When it comes to employees, an employer handles deducting and paying Professional Tax to the state government, subject to any monetary thresholds set by the state’s legislation.
• Persons who operate a freelancing business without employing anyone are likewise needed to register, subject to any monetary thresholds imposed by the particular State’s legislation.
• An employer (Company, Partnership Businesses, Sole Proprietorships, among other examples) who is also a person carrying on a trade or profession is obligated to pay Professional Tax on that trade or profession, subject to any monetary thresholds set by the individual State’s legislation.
• In this scenario, the employer must register and get both a Professional Tax Registration Certificate and a Professional Tax Enrolment Certificate to pay Professional Tax on his trade/profession and deduct the tax from his employees. Furthermore, depending on the regulations in each state, separate registration for each office maybe required.

Consequences of Professional Tax regulation violations

While the exact amount of the penalty or penal interest depends on the legislation of each state, all of these states may levy a penalty for failing to register once Professional Tax legislation is in effect.

There are further penalties for failing to make a payment by the due date, as well as for failing to file a return by the due date. For example, in Maharashtra, a penalty of Rs 5 per day is applied for late registration, the interest of 1.25 percent per month for late payment, a penalty of 10% of the amount of tax in case of late/non-payment of Professional Tax, and a penalty of Rs 1000 – Rs 2000 for late submission of the return.

An Informative Read: A Complete Guide for a Taxpayer for E-filing of Income Tax Return

FAQs on Professional Tax Payment

1. What are the employees’ responsibilities for Professional Tax?

The business owner handles deducting Professional Tax from his employees’ salaries and remitting the money to the proper government department. He or she must file a return with the tax department in the approved format and within the time frame. Proof of tax payment should be included in the return. If the payment evidence is not enclosed, the register will consider the return incomplete and invalid.

2. Is it possible to claim Professional Tax?

By filing Income Tax Returns for that year, a person can claim a refund of the excess tax paid/deducted during that year. To seek a refund from Professional Tax, an individual must file a return for the appropriate assessment year by July 31 (unless the deadline is extended) under the Income Tax Act.

3. I am a self-employed professional. Is it necessary for me to pay Professional Tax?

Yes, Professional Tax is applicable to professionals whose income is above the stipulated limit as set forth in your state’s Professional Tax Laws.

Conclusion

Within 30 days after hiring employees, the Professional Tax registration application must be submitted to the State’s Tax Department. If you have more than one place of work, make a separate application to each authority for each place of work that falls within their jurisdiction.

A penalty of Rs. 5/- per day is imposed for failure to get a Professional Tax Registration Certificate. If you pay your Professional Tax late or do not pay it at all, you will be fined 10% of the amount you owe. It charges a penalty of Rs. 300 per return if returns are filed late.