Overview of Professional Tax Registration
Professional Tax refers to the tax the State Government levies for the infrastructure it provides to its citizens to carry out their profession smoothly. This tax is levied on all kinds of professions, trades, and employment, and its applicability is based on the income of the following:
Professional Tax varies from state to state. There are different set of rules and regulations to govern the same depending upon the state; however, all states follow a slab system based on the income to levy professional tax. Further, Individuals carrying out freelancing business without any employees are required to obtain a Professional tax certificate according to the pecuniary threshold, if any, provided by the respective State Authorities.
Types of Professional Tax Certificates
The types of Professional Tax Certificates are enlisted below:
- PTEC (Professional Tax Enrolment Certificate)
This type of professional tax is paid by the business entity, i.e. Private/ Public Limited Company, owner or a professional, i.e. Sole Proprietor or Director Etc. through this certificate
- PTRC: (Professional Tax Registration Certificate)
Here, the Government or Non- Government employer deducts the tax from the employee’s salary and deposits the same to the government.
Note: A professional tax imposed is subject to the exemption provided by the respective State to particular categories.
Benefits of Professional Tax Registration
The benefits of Professional tax Registration is given below:
- Imposes Minimal Restriction
It is simple to comply with the Professional Tax Compliance, which results in a smooth registration process with minimum restrictions.
- Helps in Avoiding Penalty It is compulsory to pay Professional tax as per the law. Hence, the timely payment of Professional tax can help avoid penalties and any punitive action against the employer or a self-employed person.
- Enables Smooth Registration Process
Professional Tax Compliance is simple, which can enable a smooth and hassle-free Registration Process.
- Helps in the Implementation of Development and Welfare Programs
The Professional Tax acts as a revenue source for the state governments that helps the government to implement schemes for the various welfare and development of the region.
- Can Claim Deduction
The employer or the self-employed person can claim a deduction on the previously paid professional tax.
Who are liable for Professional Tax Registration?
The liability of the payment of tax depends on the state where it is applicable; you can check the list of individuals who can apply for Professional Tax Registration:
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Essential Documents Required for Professional Tax Registration
The list of essential documents required for Professional Tax Registration is given below:
- Application Form
- In case the applicant is a Company, the company's COI, AOA & MOA, and PAN. (Attested by the Director).
- Address proof and Identity proof of all directors, along with the passport size photo
- Bank account details of the Company along with a bank statement and cancelled cheque.
- Proof of Registered Office can be a rent agreement in the case of rented property, NOC from the owner.
- Board Resolution in case of a company-and the Declaration of consent by the concerned Partner In case of Partnership along with Salary and attendance register.
Procedure for Professional Tax Registration
The procedure for Professional Tax Registration depends from state to state. Further, Returns must also be filed at specified intervals depending on the State’s requirement. Professionals /Employers seeking professional tax registration shall follow the below-mentioned procedure.
Step 1: Filing the Application with Necessary Documents
The applicant must file the application form and the requisite documents.
Step 2: Submitting the Application to the Concerned state Government & Tax Department
The applicant needs to submit the Application with the necessary documents to the concerned state government. A copy of the same should also be submitted to the tax department.
Step 3: Scrutinization by the Tax Authority: On receipt of an application, the tax authority shall scrutinize the application to ensure that all the information is correct.
Step 4: Issue of Registration Certificate: The authority will issue the Registration certificate after successfully scrutinising all the documents.
Penalties Imposed in Case of Violation of Professional Tax Regulation
The individual who defaults in the timely payment of the professional tax would be liable for a penalty by the state government if the concerned person has not registered for the professional tax even after it has become applicable. The penalty varies from state to state. The penalty shall be levied in the following cases.
- Failure to Obtain Registration:
Here, the defaulter will be liable for the penalty for the period during which he remains unregistered.
- Late Deposition:
Here, the penalty shall be levied due to a delay in depositing the required amount to the government
- Non-Deposition Of Amount
If a person fails to deposit the requisite amount it can be recovered by the officials together with Interest from the assets of such defaulter and applicable penalty. Moreover, they have the power to attach his bank account also. In severe cases, prosecution cases also can be filed.
Further, the penalty can be levied for failing to initiate any payment within the due date and failing to file the return within the specified due date.
- A penalty of Rs 5/- per day is applicable for the late obtainment of the registration certificate.
- The penalty will be 10% of the amount of tax, where there is non/late payment of professional tax,
- in case of late filing of returns, the individual will be liable to pay Rs 1000, and if there is a delay which exceeds one month, the penalty would be Rs 1000
Persons Accountable to Collect and Pay Professional Tax
Professional tax is a tax that must be paid by every individual who earns income; however, The calculation of the professional tax and the amount which needs to be collected varies from state to state. The slab rate for the payment and collection of tax is predetermined by every state. The tax is collected by the Commercial Tax department of the respective state either monthly or annually through the PTEC or PTRC Certificate. However, the maximum amount is Rs. 2500 per year
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Corpbiz Assistance in Professional Tax Registration:
The elementary information would be mandatory from your end to start the process. The Attorney will begin working on your request once all the information is provided and the payment is received.
Frequently Asked Questions
Yes, if an individual is a salaried person, he/she must pay professional tax.
A professional tax is a tax levied by the state government that differs from one state to another. Every state declares its own slab rate, and the professional tax is deducted based on the slabs decided by the authority.
The maximum amount of professional tax levied by a state is Rs. 2,500.
No, Professional tax is imposed only in the following states: -
Yes, Professional Tax is applicable even for freelance professionals if income exceeds the specified limit as per the Professional Tax Laws applicable in the state where the freelancer resides.
An employer who deducts the tax from the salary of the employee and pays to the government, such entity shall obtain registration certificate while employer if not deduct professional tax then the individual shall get enrolment certificate from necessary authority.
The Certain state allows the concept of a composition scheme under which any individual liable to make payment to the state government may make a lump sum payment in advance of Rs. 10,000(at a rate of Rs. 2500 *4).
The liability will arise on the date on which the employer disburses salary to any of his employees in the taxable limit for the first time.
Not all States and Union Territories charge Professional Tax. The state where Professional tax is not applicable are-