Income Tax

Applicability of Professional Tax Registration in Punjab

Professional tax is a state-level tax levied on professions and trades done in different states in India. The rate of professional tax may differ from one state to another. It is based on the slab amount, which is not universal but differs from state to state. The Punjab State Development Tax^[1], or the professional tax, was introduced in 2018 that governs this form of taxation. It was introduced to gain additional revenue. This article will provide a complete overview of Professional tax registration in Punjab.

Professional Tax- Introduction

It is a direct tax levied on individuals who earn income through practising a profession, trade, or employment, unlike the concept of income tax which the Central Government levies. The different state governments in India levy this form of taxation.

A number of states have imposed this form of tax. Some states charge this tax as a percentage value, while some states charge it as a fixed amount.

Applicability of Professional Tax Registration in Punjab

Article 276 of the Constitution states that a tax shall be levied and collected on professions, trade, or employment. A person engaged in such profession, trade, etc. and who falls under the classes specified in the second column of the schedule must pay tax to the state government.

Thus, those who start a new business or profession must take the registration.

The tax shall be levied on those persons in the categories specified in the schedule if they are income tax payees. It means that the tax shall be payable only by those individuals whose taxable income exceeds the maximum amount, which is not chargeable to the Income Tax by the tax amount payable by the person under the Punjab State Development Tax Act for that year.

In case a person comes under the ambit of more than one category in the schedule, then such a person shall be required to pay the tax only under a single category.

Specific individuals are not required to pay professional tax. These include senior citizens, persons earning casual wages, and those who rely upon agricultural activity for income.

Thus, these persons are exempted from the liability of paying professional tax.

Professional Tax Registration in Punjab- Self-employed persons and Salaried Individuals

The self-employed persons who practice a profession or trade on their own and come within the purview of professional tax are required to pay the tax to the state government.

Self-employed persons are required to obtain a certificate of enrolment from the prescribed authority of the respective state by following the prescribed procedure.

However, in the case of a salaried person, the employer deducts professional tax from the salary of the employee on a monthly basis. The employer is required to obtain a certificate of registration from the concerned authority by following the prescribed procedure. Such an amount is deposited with the state government by the employer.

Grant of Certificate of Registration

An application for professional tax registration can be made in Form PSDT-1. In order to obtain a certificate of enrolment, one should apply through Form PSDT-2.

If a person has more than one place of work within Punjab, he or she shall make one application in respect of all those places. They must declare one of those places as the principal place of work and others as additional places.

The application for registration can be submitted either electronically or through a government-authorized agency.

When the application is received, a temporary registration number will be issued immediately. The application shall be sent to the designated officer, and in case it has been filed electronically, it will be forwarded to the login of the designated officer.

Suppose the designated officer is satisfied that the application is filed in order and all particulars have been attached. In that case, a permanent registration number shall be issued in the form of a certificate. In case the designated officer is not satisfied that the application is filed in order and that all particulars have yet to be attached then he shall direct the applicant to furnish such information.

It is worth mentioning here that where a person is engaged simultaneously in the employment of more than one employer, the person should provide a certificate to every employer and pay the tax himself, or he may choose any employer for payment of tax.

Documents Required

The following documents will be needed for professional tax registration-

• Copy of PAN;
• Proof of establishment of the business in the form of partnership deed, MOA, AOA, etc.;
• Residence proof of the partners, directors, and proprietors;
• Proof of the business place like electricity bill, rent receipt, etc.;
• Establishment certificate;
• A Cancelled cheque.

Benefits of obtaining Professional Tax Registration

The following are the benefits of obtaining this registration-

• Be compliant

You can stay compliant with the laws and regulations of the state, which will help you to run your company and business seamlessly.

• Avoid hefty fines and penalties.

You can also avoid paying penalties and fines.

• Nominal Burden

As the taxes are nominal thus, the burden of payment of tax on the taxpayers is also minimal.

• Tax can be a source of revenue for welfare schemes

Such a tax acts as a source of revenue that the state government can utilize. It can fund welfare and development schemes in the respective states.

Returns

Registered taxpayers must assess their tax payments and file a return to the concerned authority. It will outline the person’s gross income every year through their trade or employment.

Every registered employer should make an assessment of the tax and file return in the prescribed form and within such dates as may be prescribed. It should contain the salaries and wages paid by the employer and also the details of the tax deducted in respect of the same.

Such a return should be filed along with proof of tax payment in full that was due.

In the case where the person who is required to file a return observes any omission or any incorrect statement after submission, then such person may furnish a revised return pertaining to the period covered by the return.

Penalties relating to Professional Tax Registration in Punjab

In case an employer or a person who is required to get such registration or enrolment has failed to apply for the registration certificate without a reasonable cause. The designated officer shall impose a penalty of Rs. 50 for each day of delay. Please note that no penalty can be imposed without providing an opportunity for a hearing for the assessee.

Suppose the employer or the person who has to get the registration has intentionally provided false information in an application. In that case, the designated officer shall impose a fine of Rs. 5000 on such employer or person after providing an opportunity to hear.

Penalty on non-compliance with post-registration requirements

In the case where the registered employer or the person who has been enrolled fails to file a return within a prescribed period, then the designated officer shall impose a fine of Rs. 50 for each day of delay. Please note that here also, no penalty can be imposed without providing an opportunity for a hearing to the assessee.

In the case where the registered employer or the enrolled individual fails to make payment of the tax within the prescribed period without a reasonable cause, then the designed officer shall impose a fine equal to 50% of the tax amount but only after providing a reasonable opportunity of hearing.

In a case where the registered employer or the enrolled individual intentionally fails to maintain the books of account or such other documents, the commissioner may impose a fine of Rs. 50 for each day of delay after providing an opportunity of hearing to such a person.

Conclusion

Professional Tax Registration in Punjab can prove to be a seamless exercise as the complete process is online. The Punjab State Development Tax Act governs the levy of such tax in the state of Punjab. Considering the welfare aspect, the additional revenue generated from professional tax registration helps implement various development schemes in the state. Various state governments levy this tax on individuals in the practice of any profession, including CAs, Doctors, etc.

Read Our Article: Know whether you are required to Pay Professional Tax or Not?