The nomenclature ‘Professional tax’ sometimes fails to deliver its actual meaning. It is a tax which is levied on all kinds of professions, trades, and employment. The tax is applicable based on the income of such a profession, trade, and employment. In fact, business persons, freelancers, etc are liable to pay tax once their income increases the monetary threshold. Unlike income tax which is imposed by the central government, professional tax is imposed by the state government. Though, states like Delhi, Haryana, and UP are exempted from professional tax.

Who pays Professional Tax?

Self-employed personnel’s who are involved in any kind of profession and trade and fall in the ambit of professional tax are legally responsible for paying tax to the state government. The professional tax is collected by the Commercial Taxes Department of a state/union territory. The tax slabs vary for each state and union territory. The tax is applied to the annual taxable income of the individual; however, it can be paid either monthly or annually. It is necessary for self-employed personnel to obtain the certificate of Enrolment from prescribed authority (of the concerned state) in the prescribed manner.

In case of salaried individuals and wage earners, Professional tax is deducted every month from the salary of employees. An employer cannot deposit the deducted amount without obtaining the certificate of registration from the concerned authority.

Professional Tax Applicability

Professional tax applies to the following class of persons in states where it is applicable:

• Individual
• HUF
• Private/Public/One person Company
• Co-operative Society
• Association of Person
• Body of Individuals

Payment of Professional Tax

Professional tax is paid and collected at a pre-determined slab rate. It is collected either annually or monthly by the Commercial Tax Department of the respective state. Professional tax is paid directly by a self-employed person engaged in profession or trade business while in case of salaried employees, it becomes employers’ responsibility to deduct and deposit such tax to the respective State Government.

In case of a salaried individual, the employer shall deposit such tax every month while a self-employed person has the liberty to pay professional tax either monthly or annually. The self-employed taxpayer shall obtain Certificate of Enrollment from the tax department of the concerned state.

Tax Rate Slab

Professional tax is a state tax which is levied as per the slab provided by the respective states. Some states charge it at a fixed percentage while others charge it as a fixed amount based on Income Slab such as:

Benefits of Professional Tax Registration Online

Following are the reasons why one should never miss professional tax liability:

• Payment of professional tax is a judicial requirement and hence avoiding it can call for any penalty or prosecution, self-employed person and employer shall pay their professional tax as per the rates provided by their concerned state without any delay
• Professional tax is simple to comply with. Regulations governing professional tax impose minimal restrictions and are easy to get registered with simplified annual/monthly compliances.
• The deduction can be claimed of earlier paid professional tax on salary.
• Professional tax is a state tax; therefore, it becomes a state government or local tax authority’s obligation to collect professional tax deducted on professional fees, business income, and salary.

Documents required for Professional Tax Registration Certificate

List of documents required to get professional tax registration:

• if the applicant is Company: COI, AOA & MOA
• if the applicant is LLP: LLP Agreement
• PAN of the company
• Address proof for business
• Identity proof of all directors
• Address proof of directors
• Passport size photograph
• Salary register maintained by the company of its employees

Professional Tax Registration Process Online

Dealers seeking professional tax registration shall follow these steps to get professional tax registration certificate:

• The applicant can apply online through CTD portal
• The applicant shall file the form and attach necessary scanned documents (Mentioned above)
• One can also apply offline by direct submitting the documents and application form with prescribed fee to the concerned State Government
• Once the applicant applied for registration, he/she should submit the hard copy to the concerned tax department
• Tax authority upon the receipt of an application shall scrutinize it for its correctness
• Once the department has scanned and verified the application, it shall approve the same and issue the registration certificate to the applicant
• Department can also raise a query in case it found a flaw in the application which shall be responded on time.

Consequences of violation of professional tax regulation

Penalty is levied on individuals who fail to submit their professional tax. All states impose a penalty for not registering professional tax once it has become applicable. Though, the amount of penalty varies from state to state. Further, states also impose penalties for failing to initiate any payment within due date and also failing to file the return within the specified due date.

A penalty of Rs5/- per day is applicable on late obtaining the registration of certificate. In case of non/late payment of profession tax, penalty will be 10% of the amount of tax. An individual is liable to pay Rs1000 in case of late filing of returns. After one month, a penalty of Rs2000 will be imposed.

Frequently Asked Questions