1. What is professional tax?
It is a tax which is levied by the State on the Income earned by the way of profession, trade, calling or employment. This tax is levied based on slab rates depending on the Income of the individual. This tax is just like Income Tax except for the fact that Income tax is collected by Central Govt and Profession tax is collected by the State Government. Any amount paid as Profession Tax is allowed as a deduction.
2. Who should pay
If you are a salaried person working with an employer, professional tax is deducted from the employee’s monthly salaries and the employer makes the payment to the state government.
Self employed persons(example freelancers) are also liable to pay tax by themselves by registering for it by applying through a form. Once you obtain the form, a registration number will be issued to the individual. Payment of the professional tax can be made under these registration numbers at banks.
3. What is the limit
The professional tax was introduced in 1949 and the limit was Rs.250. It was raised to Rs.2500 in the year 1988 and the maximum amount that can be levied by any State is Rs. 2,500 only.
4. Penalties for Non-Compliance on Professional Tax Payment
The amount of penalty may differ from state to state.
For example in the state of Maharashtra:
- Delays in obtaining Registration Certificate, a penalty of Rs. 5/- per day.
- In case of non/late payment of professional 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.
5. Professional tax slabs in various states
To know the states where professional tax is applicable/ not applicable and to calculate professional tax – https://www.sumopayroll.com/resources/professional-tax-slabs/.
Following are the exemptions
- Parent or guardian of a physically challenged or mentally retarded child.
- A person suffering 40 percent or more of permanent physical disability or blindness.
- An assessee has completed 65 years of age. For the state of Karnataka, it is 60 years
Note: The above provisions can vary in different states.