What Is Professional Tax?

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Professional tax is an indirect tax levied by most of the Indian state governments and specific municipal corporations on salaried individuals, working in government or non-government entities, or in practise of a profession, including chartered accountants, doctors, lawyers etc or conducting some business or merchant activities.

Schedule I of the Act governing Professional tax specifies 'person' liable to pay the professional tax and that includes as many as 21 entries covering various 'person' categories.

The rate at which various 'person' categories are liable to pay tax is also provided in the Schedule I.

The professional tax is a source of revenue for the government which helps the different state governments in implementing schemes such as Employment Guarantee Scheme.

State governments in India levying Professional tax

The state governments levying professional tax include Andhra Pradesh, Assam, Chhattisgarh, Gujarat, Maharashtra, Meghalaya, Madhya Pradesh, Orissa, Karnataka, Kerala, Tamil Nadu, Tripura and West Bengal. However, states such as Haryana, Uttar Pradesh, and Union territories , including Delhi, Chandigarh and others.

Employer held accountable for deduction from salary and consequent payment of professional tax

The professional tax for being in a service is deducted from the salary and is payable to the state government by the employer where the office or company of the concerned employee is located.

The payment of professional tax is mandatory just like the income tax. And, contribution of the professional tax provides for exemptions under the income tax.

Obtainment of Certificate of Enrollment for discharge of Professional Tax Liability

The 'person' liable to pay-off the professional tax needs to receive the Certificate of Enrollment from the Professional Tax Authority within one month from the date of such liability.

In case the ' person' specified is a company then it also has to obtain the certificate after the appointment of employees on its payrolls.

Further, if the company operates, in several states, it needs to distinctly apply to concerned state authority as the employer's location is governed by the jurisdiction of the respective authority.

Rate at which professional tax is levied

The rate at which the professional tax is charged differs from states to states. Also, the state governments charge such tax with respect to the profession, term of service in the profession as well as the the total turnover or income earned.

Further, a maximum of INR 2,400 is payable on an annual basis as professional tax, subject to the individual's salary pre-specified rates are provided for the calculation of the same. The payment of professional tax is made via Challan No. VIII.

Mode of Payment of Professional Tax

As per the Times of India report only lately Rajkot Municipal Corporation (RMC) initiated online payment system for the payment of professional tax.

With such a move, 'person' liable to pay professional tax in the region would no longer need to personally visit a civic center for payment of tax.

It is also reported that sooner net banking facility for professional tax payment would be offered in the by the municipal corporation.


Read more about: tax, indirect tax, professional tax
Story first published: Monday, July 8, 2013, 9:09 [IST]
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