Professional Tax Registration

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Online Professional Tax Registration in Pune:

Professional tax is a direct tax charged on individuals earning income through professions like CA (Chartered Accountant), lawyers, doctors, jobs, or trade, among others. Unlike the income tax set by the Central Government, professional tax is imposed by the government of a state or union territory in India. For salaried and wage employees, the employer must deduct professional tax from their salary or wages and deposit it to the state government. For other categories of individuals, this tax must be paid by the employee personally. It is crucial for individuals subject to professional tax in their states to obtain Professional Tax Registration.

Professional Tax varies from state to state. There are different set of rules and regulations to govern the same depending upon the state; However, all states follow a slab system based on the income to levy professional tax. Further, individuals carrying out freelancing business without any employees are required to obtain a Professional Tax certificate according to the pecuniary threshold, if any, provided by the respective State Authorities. Startup Portal Business Services can assist you in understanding the professional tax requirements specific to your state and guide you through the registration process to ensure compliance with all applicable laws.

Types of Professional Tax Certificates:

The types of Professional Tax Certificates are enlisted below:

  • PTEC (Professional Tax Enrolment Certificate): This type of professional tax is paid by the business entity, i.e. Private/ Public Limited Company, owner or a professional, i.e. Sole Proprietor or Director Etc. through this certificate
  • PTRC: (Professional Tax Registration Certificate): Here, the Government or Non- Government employer deducts the tax from the employee’s salary and deposits the same to the government.

Note: A professional tax imposed is subject to the exemption provided by the respective State to particular categories.

Professional Tax Registration Applicability:

This tax is levied on all kinds of professions, trades, and employment. Profession tax is applicable to the following classes of persons:

The professionals earning an income from salary or other practices such as a lawyer, teachers, doctors, chartered accountants, etc. are required to pay professional tax.

Professional Tax Rate:

The highest annual professional tax that can be paid is INR 2,500. This tax is determined by income brackets that differ according to the professional’s total earnings and is withheld monthly from their pay.

The Department of Commercial Taxes in every state or union territory is tasked with the collection of professional tax, adhering to particular tax brackets established by the relevant state or union territory. The tax is determined by the person’s yearly taxable income and can be paid either once a year or monthly.

Who Pays Profession Tax?

For salaried and wage earners, the professional tax is deducted by the employer from the salary or wages, with the employer responsible for depositing the amount with the state government.

Self-employed individuals engaged in their own profession or trade and falling under the purview of professional tax are required to pay the tax directly to the state government.

Employer’s Responsibility for Professional Tax:

The business owner must withhold professional tax from their employees’ wages and remit the collected funds to the appropriate government agency. Furthermore, the owner is required to submit a return to the tax department using the designated form by the given deadline. This submission must contain evidence of the tax payment. Not including payment proof will make the return incomplete and invalid according to the register.

Exemptions for Payment of Professional Tax:

There are exemptions provided for certain individuals to pay Professional Tax under the Professional Tax Rules. The following individuals are exempted to pay Professional Tax:

  • Parents of children with permanent disability or mental disability
  • Members of the forces as defined in the Army Act, 1950, the Air Force Act, 1950, and the Navy Act, 1957 including members of auxiliary forces or reservists, serving in the State.
  • Badli workers in the textile industry
  • An individual suffering from a permanent physical disability (including blindness)
  • Women exclusively engaged as agents under the Mahila Pradhan Kshetriya Bachat Yojana or Director of Small Savings.
  • Parents or guardians of individuals suffering from a mental disability.
  • Individuals, above 65 years of age

Professional Tax Registration and Compliance:

Professional Tax Registration is mandatory within 30 days of employing staff in a business or, in the case of professionals, 30 days from the start of the practice.

  • Application for the Registration Certificate should be made to the assessed state tax department within 30 days of employing staff for his business.
  • If the assessee has more than one place of work, then the application should be made separately to each authority with respect to the place of work under the jurisdiction of that authority.

Due Dates for Professional Tax Payment:

If an employer has employed more than 20 employees, he is required to make the 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). However for first year employer is required to make payment within 15 days from the end of each month irrespective if employer has less than 20 employees.

Benefits of Professional Tax Registration:

Advantages of Professional Tax Registration:

  • Simple Compliance: Expert tax registration streamlines adherence, guaranteeing an effortless process with few limitations.
  • Legal Requirement: Timely payment of professional tax is legally required. Prompt payment aids in preventing penalties and legal repercussions for employers or self-employed persons.
  • Effortless Registration: The simple procedure of professional tax compliance ensures an effective and smooth registration experience.
  • Income for State Welfare: Professional tax acts as an important revenue source for state administrations, aiding welfare and development programs for the area.
  • Tax Deduction: Both employers and self-employed persons may deduct professional tax payments made in the prior year.

Documents required for Professional Tax Registration:

  • Certificate of Incorporation / Shop Act
  • MOA and AOA/ LLP Agreement/ Partnership Deed
  • PAN Card of Company/LLP/Partnership firm/Proprietor/Owner/Director
  • NOC from the landlord, where the business is situated
  • Passport size photos of Proprietor/Owner/Director/Partner
  • Address and identity proof of Proprietor/Owner/Director/Partner
  • Details of employees and salaries paid
  • Additional registrations and licenses

Procedure for Professional Tax Registration:

The process for registering for professional tax differs from one state to another. Furthermore, returns need to be submitted at designated times according to the regulations of each state. Individuals and companies looking for professional tax registration must adhere to the steps detailed below:

  • Application Submission: The applicant needs to fill out and submit the application form together with the necessary documents.
  • Submit to State Authorities: The application and required documents need to be submitted to the relevant state authorities. A duplicate should also be given to the tax department.
  • Application Review: After the application is received, the tax authority will examine the details to verify that all information is correct and comprehensive.
  • Issuance of Registration Certificate: Once the documents are successfully verified, the tax authority will provide the professional tax registration certificate.
 

Penalties Related To Professional Tax Registration:

Once professional tax regulations take effect, jurisdictions might enforce penalties for not registering for professional tax. The fine amount differs according to the regulations specific to each state.

Fines are also imposed for not timely submitting professional tax returns or for delaying payments past the deadline. The specific penalty is established by the professional tax laws of each state. Companies that ignore proper tax registration, make late tax payments, or do not submit their returns punctually could encounter penalties, late charges, or possibly imprisonment.

Extra fines are imposed for failing to meet payment due dates and for not submitting returns promptly. For instance, the Maharashtra Government enforces particular penalties for late submission or failure to pay professional tax in Maharashtra.