Profession tax the tax by the state governments in India. 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. Different states have different rates and methods of collection. In India, profession tax is imposed evel. However, not all states impose this tax. The states which impose professional tax are Punjab, Karnataka, Bihar, West Bengal, Andhra Pradesh, Telangana, Maharashtra, Tamil Nadu, Gujarat, Assam, Kerala, Meghalaya, Odisha, Tripura, Madhya Pradesh,jharkhand and Sikkim. Business owners, working individuals, merchants and people carrying out various occupations come under the purview of this tax.
Profession tax is levied by particular Municipal Corporations and majority of the Indian states impose this duty. It is a source of revenue for the government. The maximum amount payable per year is INR 2,500 and in line with tax payer's salary, there are predetermined slabs. It is also payable by members of staff employed in private companies. It is deducted by the employer every month and sent to the Municipal Corporation. It is mandatory to pay professional tax. The tax payer is eligible for income tax deduction for this payment.
Applicability of Profession Tax as per the Constitution of India: Article 276 of the Constitution of India provides that “there shall be levied and collected a tax on professions, trades, callings and employments, in accordance with the provisions of this Act. Every person engaged in any profession, trade, calling or employment and falling under one or the other of the classes mentioned in the second column of the Schedule shall be liable to pay to the State Government tax at the rate mentioned against the class of such persons in the third column of the said Schedule. Provided that entry 23 in the Schedule shall apply only to such classes of persons as may be specified by the State Government by notification from time to time.”[dubious ]
Article 276 in Constitution of India, 1949
- Notwithstanding until provisions to the contrary is made by Parliament by law, and any law so made by Parliament may be made either generally or in relation to any specified States, municipalities, boards or authorities
- The power of the Legislature of a State to make laws as aforesaid with respect to taxes on professions, trades, callings and employments shall not be construed as limiting in any way the power of Parliament to make laws with respect to taxes on income accruing from or arising out of professions, trades, callings and employments
The professional tax is a slab-amount based on the gross income of the professional and salaried and as well as the other states as may be decided employees. It is deducted from salary of the employee every month. In case of a company, directors of a company, partnerships, individual partners, self-employed professional or owners of any business undertaken in the state, it is to be submitted depending upon their gross turnover in the preceding year. In some cases, the payment of tax is fixed and is to be paid irrespective of turnover. For example in state of West Bengal, owner of a factory has to pay professional tax only if the preceding year turnover is greater than 5 lac rupees and in case of companies there is a mandatory payment of rupees 2,500 /- each year as professional tax irrespective of turnover. For west bengal professional tax slabs and rates on employee or otherwise click here.
Slab for professional tax varies across different states in India. For example: In Karnataka, PT rate is Rs. 200 for employees who earn more than Rs. 15000 of Basic + DA.  Likewise, you can find a complete list of PT rates for different states here. Click here to calculate PT based on your state.
Responsibility of Deduction
The owner of a business is responsible to deduct professional tax from the salaries of his employees and pay the amount so collected to the appropriate government department. He/she has to furnish a return to the tax department in the prescribed form within the specified time limit.
Employers have to apply for the Registration Certificate of their respective State Tax Department within 30 days of employing the staff. In case the place of work spans multiple states or place, application for the Registration Certificate has to be done separately to each authority with respect to the place of work coming under the jurisdiction of that authority.
Deposit of Amount Deducted
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.
- Employers covered under the jurisdiction of “State Government” as Designated authority shall pay in the treasury by Challan through the bank. Other employers shall pay at the place of payment declared by the Designated Authorities concerned.
- If an employer has employed more than 20 employees, he is required to make payment within 15 days from the end of the month. However, if an employer has less than 20 employees, he is required to pay quarterly(i.e. by the 15th of next month from the end of the quarter).
Person responsible to pay professional tax
In case of employees, an employer is the person responsible to deduct and pay professional tax to the State Government subject to monetary threshold if any provided by respective State’s legislation. Additionally, employer (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 monetary threshold if any provided by respective State’s legislation. In such case, employer needs to register and obtain both 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 respective State’s legislation.
Persons who are carrying on freelancing business without any employees also required to register themselves subject to monetary threshold if any provided by respective State’s legislation.
However, professional tax levy is subject to exemption provided by respective State to certain categories. For example: Parents or guardian of any person who is suffering from mental retardation, blind persons are exempted among others from levy of Karnataka Professional tax.
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, 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 due date in 1 month. After 1 month, a penalty of Rs. 2000 will be imposed.
- "West Bengal Professional Tax Slabs, Rates, Registration, Enrollment, Returns & Procedure". www.shramsamadhan.com. Retrieved 2016-10-20.
- "Professional Tax Slab Rates In Different States of India". Saral Paypack - Complete Payroll Processing software solution in Bangalore India. 2017-10-25. Retrieved 2018-07-20.
- (from 01/04/2015) (Maharashtra: Profession Tax Act 1975)