LABOR LAW LIBRARYPROFESSIONAL TAX
What is professional tax?
Professional tax is a state-level tax imposed on individuals earning income through their professions or employment in India. This tax obligation extends to various professionals in different sectors. For those in the category of salaried and wage earners, it's the responsibility of their employers to withhold and submit the professional tax amount to the respective state government. However, individuals falling into other categories are required to independently pay this tax. The precise calculation and the specific amount collected can vary between states, but there's a maximum limit set at INR 2500 per year.
- Registration for Professional Tax is a mandatory requirement, and it must be completed within 30 days of either hiring staff for your business or, in the case of professionals, commencing your practice. When it comes to deducting professional tax from the salary or wages of your employees, it’s crucial to abide by the following guidelines.
- To initiate the process, you should apply for the Registration Certificate with your state tax department within 30 days of hiring staff for your business. If your business has multiple locations, it’s important to submit separate applications to each respective authority, considering the location’s jurisdiction.
- Now, the payment timelines differ based on the size of your workforce. If you employ more than 20 individuals, you are required to make monthly payments within 15 days from the end of the respective month. Conversely, if your workforce consists of fewer than 20 employees, you should make payments on a quarterly basis, specifically by the 15th of the month following the end of each quarter. Adhering to these timelines and regulations ensures smooth compliance with professional tax obligations.
Applicable states
non-applicable states
- 01Central
- 02Andaman Nicobar Island
- 03Arunachal Pradesh
- 04Chandigarh
- 05Chhattisgarh
- 06Dadra and Nagar Haveli
- 07Daman and Diu
- 08Delh
- 09 Goa
- 10Haryana
- 11Himachal Pradesh
- 12Jammu and Kashmir
- 13 Ladakh
- 14Lakshadweep
- 15Rajasthan
- 16Uttar Pradesh
The maximum amount of Professional Tax that can be imposed by any state in India is INR 2500/-. Total amount of Professional Tax paid during the year is allowed as deduction under the Income Tax Act. The Professional Tax is a source of revenue for the state governments which helps in implementing schemes for the welfare and development of the region. Professional Tax is deducted by the employers from the salary of the salaried employees, and is deposited with the state government. Other individuals, pay it directly to the government or through the local bodies appointed to do so.
- Parents of Children with Permanent Disability or Mental Disability : Parents caring for children with permanent or mental disabilities are exempt from paying Professional Tax, recognizing the additional financial responsibilities they often bear.
- Members of the Forces : This exemption encompasses individuals serving in the armed forces, as defined in the Army Act, 1950, the Air Force Act, 1950, and the Navy Act, 1957. It also includes members of auxiliary forces or reservists who are actively serving within the state.
- Badli Workers in the Textile Industry: Persons experiencing permanent physical disabilities, including blindness, are eligible for an exemption from Professional Tax.
- Women Engaged in Mahila Pradhan Kshetriya Bachat Yojana or Director of Small Savings : Women exclusively involved in roles as agents under the Mahila Pradhan Kshetriya Bachat Yojana or serving as Directors of Small Savings are exempted from this tax.
- Parents or Guardians of Individuals with Mental Disabilities : Parents or guardians responsible for individuals with mental disabilities are also granted an exemption from Professional Tax.
- Individuals Above 65 Years of Age : Individuals who have reached the age of 65 are exempted from paying Professional Tax, acknowledging the challenges and reduced income faced by senior citizens.
- Failure to Obtain Registration : If an individual or entity fails to obtain the required registration, they may incur penalties for the duration during which they remain unregistered.
- Failure to Timely Deposit Payments to the Government : In cases where tax payments are not deposited to the government on time or are delayed, penalties may be imposed for the period during which the payment remains outstanding.
- Non-Payment of Due Amount : Authorities have the legal authority to recover the outstanding tax amount, along with any applicable penalties and interest, from the defaulter’s assets. Additionally, they possess the right to attach the defaulter’s bank account. In more severe cases, legal prosecution may be initiated against the defaulter.
- Professional Tax in India : It is essential to comply with tax regulations and timelines to avoid these potential consequences. Please be aware that tax laws and enforcement measures can vary by jurisdiction, so it’s advisable to consult with the relevant tax authorities for precise and up-to-date information on non-compliance repercussions.