Professional Tax: Meaning, Rate & Compliance

PROFESSIONAL TAX: MEANING, RATE & COMPLIANCE

INTRODUCTION:

The nomenclature ‘Professional tax’ could be one of those terms which do not completely convey the real meaning of the term. Unlike the name suggests, it is just not the tax levied only on professionals.

Professional tax is a tax on all kinds of professions, trades, and employment and levied based on the income of such profession, trade and employment. It is levied on employees, a person carrying on business including freelancers, professionals, etc., subject to income exceeding the monetary threshold if any.

As per Article 246 of the Constitution of India, only Parliament has the exclusive power to make laws with respect to the Union List which includes taxes on income. The state has the power to make laws only with respect to the Concurrent and State list.

However, professional tax though is a kind of tax on income levied by State Government (not all states in the country chose to levy professional tax). The State Government is also empowered to make laws with respect to professional tax though being a tax on income under Article 276 of the Constitution of India which deals with tax on professions, trades, callings and employment.

It may be noted that professional tax is a deductible amount for the purpose of Income-tax Act, 1961 and can be deducted from taxable income

DOCUMENTS REQUIRED FOR PROFESSIONAL TAX REGISTRATION

Incorporation Registration / Certificate
Business PAN Card
MOA & AOA of Company or LLP Agreement or Partnership Agreement etc.
PAN of Directors/Proprietor/Partners
Address Proof of Directors/Proprietor/Partners
List of Directors/Proprietor/Partners
Authorization Letter
Cancelled Cheque

EXEMPTION:

Foreign employees are exempt from paying profession tax.
Individuals who run educational institutions that teach classes up to twelfth standard.
Individuals in the Central Para Military Force (CPMF).
An individual who has one child and has undergone a sterilization operation. However, the relevant documents must be submitted.
Any ex-serviceman who comes under SI. No.1 (Schedule)
Any handicapped individual who has at least a 40% disability. However, the relevant certificate must be submitted.
Individuals who have a permit for a single three-wheeler or a single taxi to carry goods.
Deaf, dumb, and blind individuals who are earning a salary.
Civilian non-combatant and combatant members who are part of the Armed Forces. However, the Army Act must govern the Armed Forces.
Foreign technicians who have been employed by the state.
All philanthropic and charitable hospitals that are present in places that come below taluk level.

PROFESSIONAL TAX REGISTRATION

There are two kinds of Professional Tax Registrations:

1. Professional Tax Employer Registration

All business and organization are required to obtain employer registration regardless of the number of employees working in the organization. The procedure of registration is based online, after submission of application Professional Tax Enrolment Certificate i.e. PTEC (registration certificate), is issued by the Commercial Tax Department.

2. Professional Tax Employee Registration

Every employer is required to obtain professional tax employee registration on behalf of the employees. Professional tax for the employee is deducted by the employer. The certificate obtained is known as Professional Tax Registration Certificate known as PTRC.