You won't get a refund for professional tax paid at this income level Unlike TDS professional tax is not refunded if the individual's net income tax liability is less than the tax amount or nil
Professional tax is something that every individual in certain states has to pay if they are earning an income above a specified level. Although many individuals could claim an income tax deduction from their gross total income and get refund for professional tax already paid, some individuals will not be able to do so."Every salaried and self-employed individual who earns an income is liable to pay professional tax in the specified states where they earned that income," says Dr Suresh Surana, founder, RSM India, a business consulting group.
When will professional tax not be refunded if it is paid?
According to chartered accountant, Sandeep Agrawal, co-founder, Teamlease Regtech, a legal compliance firm, "An individual whose total income is below the basic exemption limit can claim deduction from his/her gross total income for professional tax paid, but it will not result in refund of professional tax actually paid."The reason for not being able to claim income tax deduction for professional tax already paid is that the income-tax Act has allowed it only as a deduction from gross total income. So, this deduction won't lead to a refund if you have not paid income tax. This is unlike tax deducted at source (TDS), which is refunded after filing of income tax return (ITR) if an individual's net tax liability is less than the TDS amount or is nil.
The under the old tax regime is Rs 2.5 lakh. For the new tax regime, it is Rs 3 lakh. This means that if an individual earns an annual gross income below the basic exemption limit, no income tax is required to be paid. Do note that the keyword is 'no income tax'. Professional tax would still have to be paid if one is earning an income above the specified limit in certain states despite earning an income below the basic exemption limit.
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For example, Ajay paid Rs 2,400 as professional tax while his net annual income is Rs 2,48,000. Since his income is below the basic exemption limit of Rs 2,50,000 for the assessment year 2023-2024, he does not have to pay any income tax. However, even if Ajay does claim a deduction for professional tax actually paid i.e. Rs 2,400 he won't get any refund and also cannot adjust it against any other income.
When will professional tax be refunded if it is paid?
Only those taxpayers who have income above the basic exemption limit and paid income tax, can claim professional tax paid as a deduction and get a refund. "When individual's income exceeds the basic exemption limit, the individual can claim professional tax deduction under section 16(iii) of the Income-tax Act, 1961. The actual amount of professional tax paid during the financial year can be deducted from the gross total income before calculating the income tax liability. The Individual should disclose professional tax deduction under para 5 of 'Schedule Salary' of the income tax return (ITR) form," says Akhil Chandna, Partner, Grant Thornton Bharat, a tax and business consulting group.How can consultants get refund for professional tax actually paid?
If a consultant wants to claim professional tax paid as an income tax deduction from their gross total income, then the process is different. "In case of self-employment, the individuals may need to obtain a Professional Tax Enrolment Certificate (PTRC) to make required professional tax payments on their own. The difference between salaried and self-employed is that for salaried the employer obtains a PTRC and deducts professional tax from the gross salary and then deposits it with the government," says Surana. Once the PTRC has been obtained the consultant must deposit the professional tax and then claim the amount so paid as a deduction from gross total income.Can claim professional tax refund at various stages of ITR filing
The deadline for ITR filing by individuals is July 31. If an individual has missed filing their original ITR, then a belated ITR may be filed. The deadline to file a belated ITR or revised ITR was December 31, for FY 2022-23 (AY 2023-24). A revised ITR is filed to correct any mistake made in the filed ITR, like someone forgetting to claim professional tax paid as a deduction in their ITR can file a revised ITR to claim it now.You Might Also Like:
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"Individuals can claim deduction of their professional tax paid under section 16(iii) in original ITR or revised ITR (if they missed claiming it in original ITR) or belated ITR," says Surana.
Who benefits from refund of professional tax?
Many individuals who have income above the basic exemption limit, are eligible to get the entire tax amount refunded when they apply for various deductions under the old tax regime. Many individuals are eligible for various types of deductions due to which they end up getting the entire tax refunded at much higher income level. So, the refund of professional income tax becomes beneficial for them only when they have some net tax payable after all deductions and exemptions.You Might Also Like:
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This story originally appeared on: India Times - Author:Faqs of Insurances
