Overview of Professional Tax Compliance Advisory

Professionals particularly pay professional tax since it appears as a deduction from income on their Form 16 or pay slips. However, most could comprehend paying professional taxes as merely an income tax deduction. To fully understand professional tax and the reasons it only applies to the salaried class, it is necessary to comprehend its numerous components. Many salaried employees may know the word since the professional tax was referenced on their pay slips and Form 16. The purpose of this page is to clarify what "Professional Tax" is, why it is withheld, and whether it is borne solely by the salaried class.

While professional tax is levied by the corresponding state or union territory in India, income tax is levied by the Central Government. The professional tax is taken from the employee's paycheck by the employer and deposited with the state government. While businesses handle this for their salaried staff, others make tax deposits. The professional tax rate varies between states depending on the individual's salary, although it never exceeds 2500.

Significance

Contrary to what the term would imply, professionals are not exempt from paying professional tax. Anyone who makes their living through a profession, employment, trade, or calling is subject to this tax. Entrepreneurs and independent contractors whose income is above the set threshold are likewise subject to the tax. According to the Income-tax Act of 1961, professional tax is a deduction from taxable income.

The following classes are subject to the professional tax:

• Individuals
• Companies, firms, cooperative organisations, and other groupings of people that identify as Hindu Undivided Families (HUF).
• Lawyers, teachers, doctors, chartered accountants, and other professionals who profit from their professions must pay professional taxes. However, some states, including Arunachal Pradesh, Himachal Pradesh, Delhi, Haryana, Uttar Pradesh, Uttarakhand, Andaman and Nicobar Islands, Daman & Diu, Dadra and Nagar Haveli, Lakshadweep, Jammu & Kashmir, Punjab, Rajasthan, Chandigarh, and Goa, do not levy professional tax.

Benefits

The benefits of professional tax registration include:

• Ensuring that professionals may readily fulfil licenced Tax Compliance,
• Allowing for the simple and regular payment of professional taxes without failing, and avoiding fines.
• One of the revenue streams for the government that helps with the implementation of plans for social welfare and state development is professional tax.
• A tax deduction may be claimed on the previously paid professional tax.
• Penalties apply if the professional tax is not deposited within the allotted time. Additionally, businesses that fail to register for professional tax or postpone payment without a valid reason risk fines, late fees, or even jail time.

Accountability of the Employer to Deposit the Professional Tax

By convention, business owners subtract professional tax from their employee's wages and deposit it with the relevant government agency. Employers must submit a return statement, which includes verification of tax payment in the approved format and within the allotted time, to the tax department.

Procedure for Payment

The method for paying professional tax varies amongst states in India. The following actions can be taken to complete the online registration:

Step 1: Log in to the official website and choose 'New Professional Tax Registration.'

Step 2: The user is directed to provide the account information must be supplied, or, if this is the user's first-time registration, the user must click 'Not Registered. The username and password secured with your mobile phone and email will be received after entering the credentials, such as your email ID and mobile number.

Step 3:In the next step, the service request must be selected by clicking 'Create Service Request' and choosing 'Professional Tax' in the drop-down box under 'Service Category'. Under Service, the user must select 'New Registration of Professional Tax'.

Step 4:After providing the necessary information, the user must upload the required Documents, such as the company's proof of incorporation, the Memorandum of Articles, Paper works of the location of the office, a certificate from the Commercial Tax Department, information regarding the bank account and PAN card, information regarding the employer and employee, etc.

Step 5: The user must click "Submit" after uploading the necessary Documents. No payment is necessary from the user to submit this application. A receipt slip and a professional tax registration number will be generated. PTNAN, or Professional Tax New Account number, is what it is known as.

The professional tax can be paid online using the preferred payment method once the above steps have been completed.

Professional Tax Rate

The state government imposes a special professional tax in each State. Each State has rules and legislation governing the professional tax in that jurisdiction. All states use a slab system to levy professional tax depending on income.

A maximum cap of Rs 2,500 has also been outlined in Article 276 of the Constitution, which gives the state government the authority to levy professional tax; anything above this amount is prohibited from being levied on anyone.

Who is responsible for paying professional taxes?

• Employers are responsible for withholding professional tax from employees' pay and remitting it to the state government, subject to any financial thresholds imposed by the laws of the individual States.
• As a person engaging in a trade or profession, an employer (corporations, partnership firms, sole proprietorships, etc.) must also pay professional tax on that trade or profession, again subject to the financial threshold, if any, specified by the relevant State's legislation.
• The employer must get a professional tax enrolment certificate and a professional tax registration certificate to pay professional tax on his trade or profession and deduct the tax from his employees' salaries. Additionally, depending on the laws of each State, each office can need a separate registration.
• Individuals who operate freelance enterprises without workers must register according to the applicable State's legal threshold for compensation.
• However, a professional tax levy is subject to the exemptions that the relevant State grants to particular groups. Parents or guardians of anyone who is mentally disabled or blind, for instance, are exempted from paying Karnataka Professional Tax.

How do I pay business taxes? Do you have any returns to file?

The professional tax is a direct tax imposed by the State instead of the federal government. It is a state-imposed tax. Therefore, the payment method may vary from one State to the next.

On the other hand, paying professional tax can be done both online and offline. You must visit the relevant State's official website to pay professional tax.

The professional tax exemptions

Some people are excused from paying the professional tax, even though it is demanded of everyone who receives a regular income (such as a salary). If you fit into one of the following categories, you are free from paying professional tax.

• (Regulated by the Army, Air Force, and Navy Act)
• An individual with a physical or mental impairment. Blindness, deafness, etc., are examples of disabilities.
• Parents of children with disabilities
• There are charitable hospitals in locations that are below the taluk level.
• The temporary employees are known as "badli" who work in factories
• People in charge of an educational institution
• A foreign worker whom the relevant State has hired
• Anyone over the age of 65
• Those women who work only as agents for the government's Mahila Pradhan, the Kshetriya Bachat Yojana

Consequences of violation of professional tax regulation

All such jurisdictions may impose a penalty for failure to register once professional tax legislation becomes applicable, albeit the precise amount of the penalty or penal interest may vary according to the legislation of the relevant State.

Additionally, there are fines for failing to pay by the deadline and failing to file the return.

For instance, in Maharashtra, the fine for registering late is Rs 5 per day. Additionally, there are penalties for non-payment or late filing of professional tax of 10% of the tax amount, late return submission of Rs. 1,000–2,000, and late payment of 1.25% monthly interest.

Service offered by Enterslice

Enterslice's professional tax compliance advisory services may include the following:

• Registration Services:
• Assisting companies in registering with the appropriate state authorities for company tax compliance.
• Guiding the registration requirements, paperwork specifications, and submission methods.
• Assessment of Compliance: Determining if a company complies with tax laws.
• Examine current procedures, systems, and records to ensure they adhere to professional taxes rules.
• Locating any potential dangers or areas of non-compliance.
• Returns and Filings:
• Preparing and submitting expert tax returns on behalf of corporations.
• Ensuring that returns are submitted accurately and on time to the appropriate state authorities.
• Advising on any potential exemptions or deductions, as well as the calculation of professional tax liabilities.
• Advisory & Consultation:
• Giving knowledgeable counsel and direction on issues about professional taxes.
• Helping organisations comprehend professional tax compliance's legal demands, obligations, and ramifications.
• Providing advice on how to structure employee compensation to minimise the effects of professional taxes.
• Support for Audits:
• Assisting companies during expert tax audits carried out by state agencies.
• Reviewing audit letters and information requests.
• Assisting companies in audit preparation and acting as their representative during the audit process.
• Updates and Compliance Monitoring:
• Informing businesses of modifications to professional tax rules and laws.
• Monitoring compliance standards and due dates ensures businesses stay current and avoid fines.