Introduction:
Professional Tax is a direct tax in India. It is a levy and collected by the state government in India. There are state-wise variations in rates and procedures of collecting professional tax but not all states impose the professional tax. Some states which impose professional tax are Punjab, Karnataka, Bihar, Maharashtra, Tamil Nadu, Jharkhand etc. and further next states not impose professional tax are Arunachal Pradesh, Delhi, Haryana, Uttar Pradesh, Andaman and Nicobar Islands (UT) etc. Any person who is either earning a salary or practising business such as a lawyer, doctor, actor, freelancer, chartered accountant and person carrying occupations etc. shall be liable to pay professional tax.
Professional Tax is a source of revenue for the government in India. It is collected either by the Commercial Taxes Department of state or Municipal Corporations. It is mandatory to pay professional tax for a person who resides or carry a business/occupation in the state imposing the professional tax. The maximum amount payable per year is INR 2,500.
Professional Tax Rate
Professional tax comes under state list subject and varies from state to state. It further states the state may charge this tax based on percentage value or on income slabs. Following are some states in India:
| State | Income Per Month | Tax Rate |
| Maharashtra | Up to Rs. 7,500 Up to Rs.10,000 From Rs.7,500 to Rs.10,000 Rs.10,000 onwards | Nil (for male) Nil (for female) Rs.125(for male) Rs.200 for 11 months + Rs.300 for 12 months |
| Karnataka | Up to Rs.15,000 Rs.15,001 onwards | Nil Rs.200 |
| Gujarat | Up to Rs.5999 Rs.6000 to Rs.8999 Rs.9000 to Rs.11999 Rs.12000 and above | Nil Rs.80 Rs.150 Rs.200 |
| Andhra Pradesh | Less than Rs.15,000 Rs.15,000 to less thanRs.20,000 Rs.20,000 and above | Nil Rs.150 Rs.200 |
| West Bengal | Up to Rs.10,000 Rs.10,001 to Rs.15,000 Rs.15,001 to Rs.25,000 Rs.25,001 to Rs.40,000 Rs.40,001 and above | Nil Rs.110 Rs.130 Rs.150 Rs.200 |
Professional Tax Registration
There are three options to get immediately registered under Professional Tax. The owner/employer can apply for PT registration using the following facilities:
- Through Online Mode
- Through Courier/ Registered Post
- In-person before the Concerned Registration Authority (DCTO)
In India, any person who has a monthly income not less than Rs.7500 became liable to pay Professional Tax (PT) and have PT Registration. The owner or employer is required to collect tax from employees and pay to the state government. There are two types of registration provided as first Professional Tax Registration Certificate (PTRC) and second Professional Tax Enrollment Certificate (PREC).
Professional Tax Registration Certificate (PTRC)
Every individual who working under any owner or employer and earning income/salary then that individual or employee should get registered under PTRC. For example- Government and non-government employees etc
Professional Tax Enrollment Certificate (PTEC)
If any individual generating income as an owner or employer immaterial of self-employed or having employees then that individual should get registered under PTEC. The owner or employer needs to have both certificates as PTRC and PTEC. For example-business entity, owner and professional (Private/ Public Limited Company), Sole Proprietor, Director Etc.
Necessary Document Required to Get Registered
- Aadhar Card Copy
- Pan Card of Assessee
- Cancelled cheque
- Passport size photo
- Details of business
- Photo signature
- Number of employees at the workplace
- Email Id and mobile number of the assessee
- Date of commencement of business
- Receipt of electricity bill of the registered office
- Place of business property or if rented property the rent agreement
State Wise Variation of Professional Tax
Professional tax comes under the state list of the constitution of India so states have the discretion to make law accordingly. Different states have their various professional tax laws and own tax slabs. However, these laws also depend upon territory, population, economic conditions, working hours etc. the total amount of professional tax shall not exceed Rs.2500 per year to an individual.
In the report of Sarkaria Commission, while considering the question of raising the limit of professional tax observed in its report that there exists a substantial need for an upward revision in the limit of professional tax and the limits ought to be increased every once in a while. The Commission likewise noticed that the States were in a poor shape to garner a large amount of revenue from professional taxes due to the low limits set therein. In lieu of the persistent inflation, the commission further expressed that there is a need for periodic review of the limit.[1]
Liability to Pay Professional Tax
Profession tax is mandatory to pay and applicable to the following natural and artificial 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.
- LLP/Club/Architect/Engineer/Insurance Agent/Chartered Account/Tax Consultant/Company Secretary/Surveyors/management
Exemption from Professional Tax
The following people are exempted from professional tax:
- Individuals who run educational institutions up to twelfth standard.
- Individuals in the Central Para Military Force.
- An individual who has a single child and has undergone a permanent surgery of vital part. However, the requisite documents must be submitted.
- Any ex-serviceman
- Any 40% handicapped disabled individual. However, the necessary certificate should be submitted.
- Individuals who have a permit or license for a single three-wheeler or a single taxi to carry goods.
- Deaf, dumb, and blind individuals who are underemployed.
- Armed Forces civilian (non-combatant and combatant members) under the Army Act.
- Foreign technicians work under state employment.
- All philanthropic and charitable hospitals
Applicability
A maximum of Rs. 2,500 can be levied as a professional tax on any person per financial year. According to Section 16 (iii) of the Income Tax Act 1961, the professional tax paid by an employee is allowed as a deduction from his/her gross salary income.
Under Entry 60 of List II, the power to levy taxes on profession, trades, callings or employments is conferred on the State legislature. Under the Constitution of India, Article 276(2) empowers the State government authorities to levy Professional Tax, Article 276(2) states that “the total amount payable in respect of any one person to the State or to any one municipality, district board, local board or other local authority in the State byway of taxes on professions, trades, callings and employments shall not exceed two thousand and five hundred rupees”.
Article 276 of Constitution deals with a mode of imposing a tax on professions which, if not limited, will render it indistinguishable from a tax on income.[2]
Case Laws
All India Federation of Tax Practitioners v. Union of India [2001] 116 Taxman 418
A practising chartered accountant or architect may not render any service but he will be liable to pay professional tax.
Kamta Parsad Aggarwal v. The Executive Officer, Panchayat Samiti, Ballabgarh ILR[3]
The purpose for incorporating the monetary limit under Article 276 has been explained by the apex court by taking reference of the Section 142-A of the Government of India Act, 1935 by stating that non-inclusion of the monetary limit might bring professional tax in conflict with the tax on income enshrined under the Federal List.
Penalty
If an enrolled person/registered employer or owner fails to pay the tax within the time he shall be liable to pay simple interest at 1.25% of the tax payable for each month for which the tax remains unpaid. The Commissioner is empowered to reduce/waive this interest in respect of any period, after recording reasons.
Further, if the enrolled person/registered employer fails without reasonable cause, to make payment of any tax within the required time the prescribed authority may, after a reasonable opportunity of hearing, impose a penalty equal to 10% of the tax due[4].
Conclusion
Therefore Professional Tax is a tax levied by the government and comes under the direct tax. The professional Tax is not limited to professionals only. It applies to all individuals who generating income and involves in it. The Professional Tax is collected by the State Government and used for revenue of the government. The Professional Tax varies from state to state depends upon respective laws. The Professional Tax is mandatory for every individual with having exemptions. It also provides a penalty in case of non-compliance to payment.
References:
[1]Report of Sarkaria Commission on Centre-State Relations, Chapter X, <http://interstatecouncil.nic.in/wp-content/uploads/2015/06/CHAPTERX.pdf
[2] Indian Constitution. Art. 276; The Government of India Act, 1935, Sec. 142.
[3] (1968) 2 P&H 695, 700
[4] Maharashtra Professional Tax Act, 1975
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