Professional Tax is well known to many salaried employees, as it appears on their payslips/Form 16. Yet all may not know what it is and why it is deducted from their salary income on their payslips/Form 16. So, this article aims to provide a better picture of what ‘Professional tax’ is, how it is collected, and whether only salaried classes pay it.
What Is Professional Tax And Who Levies It?
There could be some nuances in the nomenclature ‘Professional tax online payment’ that do not convey the term’s true meaning. It is not a tax on professionals, as the name implies. All professions, trades, and employment are subject to the professional Tax, based on the income of such professions, trades, and employment.
This Tax is levied on employees, entrepreneurs, freelancers, professionals, etc., whose earnings exceed the monetary threshold. The Union List, which includes income taxes, is exclusively the domain of the Parliament under Article 246 of the Constitution of India. The state has the power to make laws only concerning the Concurrent and State list.
Professional Tax, however, is a form of income tax levied by state governments (not every state in the country imposes professional taxes). Professional Tax is also a tax on income that the State Government can impose according to Article 276 of the Indian Constitution.
Under this Tax, profession, trade, calling, and employment are dealt with. Generally, professional Tax may be deducted as a deduction from taxable income under Income-tax Act of 1961.
Professional Tax Rate
State governments levy different professional taxes in different states. A state’s professional tax laws and regulations are specific to that state. To levy professional taxes, all states use a slab system based on income. The Constitutional article that permits the state to levy professional Tax also sets a maximum cap of Rs 2,500, beyond which the Tax cannot be charged.
Who Is Responsible To Collect And Pay Professional Tax?
Employers collect professional taxes from their employees. As required by each state, the employer collects and sends the Tax to the Commercial Tax Department. A municipality corporation collects professional Tax on behalf of the state’s Commercial Tax Department.
A company, partnership, or sole proprietor can be the employer. As a business entity itself, the employer also pays professional Tax. If the state government provides a monetary threshold, they must pay professional Tax.
Employers must register and obtain a professional tax registration certificate. Having this certificate allows them to pay professional Tax. In addition, they must obtain a professional tax enrolment certificate, which will permit them to deduct and pay payroll taxes from their employees. Separate registrations are required in each state if the business operates in more than one.
Per respective state legislation, freelancers are also liable for professional Tax per the monetary thresholds. The state registration will require them to pay taxes according to their income threshold, and they will have to register with the state registration.
Difference Between TDS And Professional Tax:
An individual who earns income through the practice of a profession, employment, calling, or trade is subject to profession tax. State or Union territory governments levy professional Tax, whereas the central government levies income tax.
In the case of salary, commission, rent, interest, professional fees, etc., TDS or Tax Deducted at Source applies. Persons who make payments deduct Tax at the source, while those who receive an income have to pay Tax.
How To Pay Professional Tax Online?
Professional Tax is calculated every month based on your gross salary. There will be changes depending on your salary increment or decrement. The Goods and Services Tax (GST) governs the application of professional Tax. Taxpayers can pay this Tax online by following these steps:
- To make an e-payment, go to the state GST’s website and click the e-payment link.
- Identify your statutory status. Next, enter the PAN/TAN number and captcha image.
- Next, select the applicable option:
- Professional Tax Registration Certificate (PTRC): Applicable for an employer or company
- Professional Tax Enrolment Certificate (PTEC): Applicable for sole proprietors, partnership firms, or individuals.
Consequences Of Violation Of Professional Tax Regulation
A business must register with the professional tax authorities. The Tax is also imposed on all individuals according to their income threshold. There are penalties for not registering or paying this Tax. If one fails to pay on time, one is subject to penalties. Non-filing of returns can also be penalized in some states. Each state may impose a different penalty.
Bottom Line
As with many kinds of taxes, the rules regarding Professional Tax can vary over time, and it’s advisable to get a tax consultant to review those rules with you. You can also register for payments online with our help.
