Professional tax has to be paid by salaried people in these 21 states It is only when someone earns an income in any Union Territories and some states like Delhi, Uttar Pradesh, others that they need not pay any professional tax
Certain state governments levy a professional tax on individuals - salaried as well as non-salaried - earning income above a specified level. This tax needs to be paid by almost all income earners irrespective of the type of income: salary or professional income such as consulting fees, business income or others."Every salaried and self-employed professional who earns income via trade, business, or any other means (such as, Consultant, Engineers, Chartered Accountants, Doctors, Legal Practitioners etc.) are liable to pay professional tax. Also, profession tax is a state subject and as such, not all states have imposed professional tax," says Dr. Suresh Surana, founder, RSM India, a business and tax consulting group.
"Even people earning a livelihood by way of working in non-professional occupations are liable for paying professional tax if they derive a salary above the state-specific professional tax income limit. Examples include peons, office boy, salesman, medical representative, cashier, etc," says Abhishek Soni, founder, Tax2Win, an income tax return (ITR) filing platform.
When can professional tax paid be claimed as a deduction?
Professional tax is a source of revenue for the state governments that impose it. The proceeds from the collection of professional tax goes into the coffers of the state government municipality. However, if an individual has a net taxable income as per Income-tax Act, 1961, then he/she can claim a deduction for professional tax paid from his/her taxable income for the purpose of calculation of income tax payable.For salaried individuals, their respective employers will pay the professional tax on the employee's behalf. This professional tax paid by the employer will be visible on the salaried individual's Form 16. It can be claimed as a deduction by the individual while filing their income tax return (ITR). "For self-employed professionals and businesses, professional tax paid is allowed as deduction as business expenditure in the profit and loss account," says Surana.
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"As per section 16(iii) of the Income-tax Act, professional tax can be claimed as a deduction from salary/taxable income. However, if the net taxable income of a person is below the basic exemption limit, then there is no benefit of claiming a deduction for professional tax. The person cannot adjust, carry forward, or get a refund for such payment of professional tax.," says Soni.
Which states levy professional tax?
At present, 21 states in India levy professional tax. It must be noted that professional tax is levied only when an individual earns an income above the specified level. However, the specified level is state-specific. In some states, anybody earning over Rs 4,166 a month needs to pay professional tax, whereas in others only when a person earns over Rs 3 lakh a month do they need to pay this tax. Professional tax is not levied in any union territory and some states such as Delhi, Haryana, Uttar Pradesh and Uttarakhand. "Do note that there is no professional tax levied on females earning up to Rs 10,000 per month in Maharashtra," says Soni.Many of the states that levy professional tax also exempts certain categories of people. The exempted categories vary from state to state and include, for example disabled people.
Maximum amount of professional tax
Also, as per the Income-tax Act no state can levy more than Rs 2,500 as professional tax in a year. This implies that professional tax per month cannot exceed Rs 2,500 / 12 months i.e., Rs 208.33 per month.
Here's a list of the states which levy professional tax:
Name of StateRange of salary income (Rs)Range of professional taxAndhra Pradesh15,001 to more than 20,000Rs 150 to Rs 200KarnatakaAbove 15,000Rs 200Maharashtra7,501 to above 10,000Rs 175 to Rs 200Tamil Nadu21,001 to above 75,000Rs 20 to Rs 208Assam10,001 to above 25,000Rs 150 to Rs 208Kerala2,000 to above 20,833Rs 20 to Rs 208Meghalaya 4,167 to above 41,667Rs 16.5 to 208Tripura7,501 to above 15,001Rs 150 to Rs 208Bihar25,001 to above 83,333Rs 100 to Rs 208Jharkhand25,001 to above 83,333Rs 100 to Rs 208Madhya Pradesh18,751 to above 33,334Rs 125 to Rs 208West Bengal10,001 to above 40,001Rs 110 to Rs 200Manipur50,001 to above Rs 100 to Rs 208Mizoram5,001 to above 15,001Rs 75 to Rs 208Odisha1,60,000 to above 3,00,000Rs 125 to Rs 200Puducherry1,00,000 to above 5,00,000Rs 125 to Rs 208Sikkim20,001 to above 40,001Rs 125 to Rs 200Telangana15,001 to above 20,000Rs 125 to Rs 200Nagaland4,001 to above 12,001Rs 35 to Rs 208Chhattisgarh1,00,001 to above 2,50,001Rs 130 to Rs 208Meghalayaabove 12000Rs 200Source: Tax2Win, a income tax return (ITR) filing platform.
Note: All figures are on per month basis.
The above table has a broad range-based minimum and maximum figures. Professional tax levy starts at the minimum income level given in the range specified by the state government. The tax rate increases with an increase in income level with the highest rate being levied on the income exceeding the maximum level in the range.
For example, in Assam the minimum and maximum income range for professional tax purposes is Rs 10,001 to above Rs 25,000. Anybody earning up to Rs 10,000 in a month will not have to pay professional tax. Hence, Rs 10,001 is the minimum level of income on which professional tax is levied by the Assam government. Therefore, anybody earning between Rs 10,001 to Rs 15,000 will have to pay Rs 150 per month as professional tax. Anybody earning between Rs 15,001 to Rs 25,000 per month will have to pay Rs 180 per month as professional tax. And anybody earning above Rs 25,000 a month will have to pay Rs 208 per month as professional tax. The highest rate of professional tax is levied on those earning above Rs 25,000 in Assam. The minimum-maximum income levels mentioned for each state in the table above work in a similar manner.
How to pay professional tax?
In most states professional tax payments can be made online. Since professional tax is levied by state government municipalities, the payment process and registration mechanism differ from state to state. Generally, most states demand payment of professional tax on a monthly basis."Generally speaking, no documents except professional tax enrolment certificate (PTEC) is required for paying professional tax. For obtaining a PTEC generally an individual is required to give certain documents. Those documents are: self-attested copies of PAN, Aadhaar card, residence address proof, cancelled bank cheque, etc. Also, for obtaining professional tax enrolment registration and making payment the procedure varies from state to state," says Surana.
Once the professional tax enrolment registration is completed the state government will issue PTEC in the name of the applicant.
What is the penalty for not paying professional tax?
For salaried individuals the responsibility of payment of professional tax lies with the employer. For others, the responsibility of paying professional tax is on the taxpayer. The penalty for failure to pay professional tax varies from state to state.In Maharashtra under The Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975, the penalty for late payment is an interest of 1.25% to 2% per month. Further, in case of non-payment, a 10% penalty on the professional tax is levied. Also, for failure to file professional tax return a flat penalty of Rs 1,000 is applicable.
Under The Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976, the penal provisions include interest of 1.25% per month for late payment and a penalty of Rs 250 per month for late return filing.
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This story originally appeared on: India Times - Author:Faqs of Insurances
