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According to Section 16 (iii) of the Income Tax Act 1961, the professional tax paid by an employee is allowed as a deduction from their gross salary income. Professional tax is a direct tax that the state government deducts on every individual who is earning an income by either practicing a profession, employment, business, or trade. At present, in 20 states and 1 Union territory, the professional tax is applicable.
Profession tax is applicable on the following classes of persons:
• An Individual
• A Hindu Undivided Family (HUF)
• A Company/Firm/Co-operative Society/Association of persons or a body of individuals, whether incorporated or not
1. Professional Tax Enrollment Certificate (PTEC)
Every business owner, professional, and company must register for PTEC. Every registered company must regularly file their PTEC Return on a yearly basis. The registered individual, professional, and company have to pay ₹ 2500 as a PTEC payment.
2. Professional Tax Registration Certificate (PTRC)
Every company (Government or Non-Government) that deducts the Professional Tax from their Employee's salary must register themselves for PTRC. Such registered company must regularly file their PTRC Return like GST.
WHO ARE EXEMPTED FROM PROFESSIONAL TAX REGISTRATION
1. Members of the armed forces.
2. Individuals with permanent physical disability.
3. Parents of children suffering from mental or permanent disability.
4. Badli laborers took part in the textile business.
5. Ladies engaged only as an agent under the directorate of small savins or Mahila Pradhan Kshetriya Bachat Yojana.
Due Date for PTEC Return Filing-
A company/firm should enroll for a Professional Tax Enlistment Certificate (PTEC) in no less than 30 days of its incorporation. Post which they need to pay their returns on or before 30th June of every year.
Due Date for PTRC Return Filing-
PTRC Return has to be filed on a monthly basis.
• Article 276 of the Constitution empowers the State Government to levy professional tax.
• The tax rates differ across all states. Nonetheless, the maximum that states can levy as professional tax is ₹2,500 per annum.
• At present, Telangana and Kerela levy the highest Tax Rate/Tax Amount in respective categories of Income per Month of employee.
All states that levy professional tax charge a penal interest or penalty from anyone who has not registered for their professional tax regime or has not made due payments as per their professional tax regime. However, the interest or penalty can vary from state to state.
• The company's Incorporation Certificate, AOA & MOA, and PAN/LLP Agreement
• PAN of company/LLP (Attested by Directors)
• Bank account details of the Company with bank statement proof and a cancelled cheque
• Passport size photo, Address and Identity proof of all directors
• If Company, Board Resolution and If Partnership Firm, Statement of Consent by concerned Partners
• Salary and Attendance Register
• Proof of Business Place with NOC from the Owner
• Establishment Certificate
The rate of professional tax varies by state, and may depend on factors such as income level and profession.
The frequency of renewal for professional tax registration varies by state, but is typically done annually.
Professional tax is a tax imposed by the state government on individuals engaged in specific professions, while income tax is a tax imposed by the central government on an individual's overall income from all sources.
Yes, professional tax paid can be claimed as a tax deduction while filing income tax returns.
Yes, some states have a threshold limit for professional tax registration, meaning individuals earning below a certain income level may not be required to register.
Yes, freelancers are also considered professionals and may be required to register for professional tax, depending on the state laws.
It depends on the state laws, some states offer the facility of paying professional tax in installments, while others require the tax to be paid in full.
Yes, if an individual fails to register for professional tax within the specified deadline, they may be subject to penalties and fines imposed by the state government.
Yes, if you move to another state and wish to continue your profession there, you will have to register for professional tax in that state and transfer your registration.
It depends on the state laws, some states require retired individuals to register for professional tax if they are receiving pension or other forms of income from their previous profession, while others do not.
It depends on the state laws and the nature of the profession. Some states may require NRIs engaged in a profession within that state to register for professional tax, while others may not.