Professional Tax - Meaning, Rates & Compliance.

What is Professional tax and who levies it?

Profession tax is the tax levied and collected by the state governments in India. It is a direct tax. A person earning an income from salary or anyone practicing a profession such as chartered accountant, company secretary, lawyer, doctor, etc. are required to pay this professional tax.

Levied under Article 276(2) of the Indian Constitution, Professional Tax is deducted by the employer from the salaries of employees every month and remitted to the state; the maximum amount that can be levied annually under this head is Rs 2,500.

Professional tax rate-

Professional tax being levied by the State Government is different in different states. Every state has its own laws and regulations to govern the professional tax of that particular state. However, all the states do follow the slab system based on the income to levy professional tax.

Maharashtra Professional Tax Slab Rate-

1) Monthly Gross Salary Upto Rs.7500 - Amount Payable As Professional Tax is NIL

2) Monthly Gross Salary Rs. 7501 to Rs.10000 - Amt payable As Professional Tax is                                                                                                        Rs. 175

3) Monthly Gross Salary Above Rs. 10000 - Amt Payable As Professional Tax is 2500 

                                           P.A.The Payment is accepted in the this method - Rs. 200 P.M 

                                             except for the month of February. Rs.300 for the month of 

                                           February.   

3. Who is responsible to collect and pay professional tax?

Professional tax is collected by the Commercial Tax Department. The commercial tax department of the respective states collects it which ultimately reaches the fund of municipality corporation.

The person responsible to pay professional tax

In the case of employees, an employer is responsible to deduct and pay professional tax to the State Government subject to the monetary threshold if any provided by respective State’s legislation. Additionally, employers (corporates, partnership firms, sole proprietorship, etc) also being a person carrying on trade/profession is also required to pay professional tax on his trade/profession again subject to the monetary threshold if any provided by respective State’s legislation. In such a case, the employer needs to register and obtain both a professional tax registration certificate to be able to pay professional tax on his trade/profession and professional tax enrolment certificate to be able to deduct the tax from his employees and pay. Further, separate registration may be required for each office depending on the respective State’s legislation.

Persons who are carrying on freelancing business without any employees also required to register themselves subject to the monetary threshold if any provided by respective State’s legislation.

4. What is the procedure to pay professional tax?Is any return to be filed?

This is again a State-specific query. However, in general, a professional tax may be paid either online/offline. Further, depending on the State’s requirement professional tax return also need to be filed at specified intervals.

5. Penalties for Non-Compliance on Professional Tax Payment

Delays in obtaining Registration Certificate, a penalty of Rs. 5/- per day. In case of non/late payment of profession tax, the penalty will be 10% of the amount of tax. In case of late filing of returns, a penalty of Rs. 1000 per return will be imposed if you filed after the due date in 1 month. After 1 month, a penalty of Rs. 2000 will be imposed.