Structured Biiz

PROFESSION TAX

Unlike the name suggests, Profession Tax is not a tax that is levied only on professionals. Profession Tax is levied on all kinds of employments, trades, businesses, etc. It is a tax that is computed based on the income of the individuals and is deductible from the taxable income earned by an individual.

Features

For all practical purposes, Profession Tax takes the colour of income tax. It is deductible from the overall taxable income of an individual. However, unlike Income tax which is levied and governed by the Central Government, Profession Tax is a tax governed and levied by the State Government. It may be noted that not all states choose to levy Profession Tax (For e.g. – Many states like Rajasthan, Uttar Pradesh, Haryana, Punjab do not levy Profession Tax). Few states choose to levy it. The rates at which Profession tax is levied may vary from state to state. Also, some states also grant rebates in case of lump sum payment of Profession Tax for a couple of years. However, all the states follow a slab rate system for the purpose of levying Profession Tax on individuals.


Who needs to be obtain? 

Everyone doing business or profession – Persons who are carrying on freelancing business without any employees are also required to register themselves subject to the monetary threshold if any, provided by the respective State’s legislation.

Governance

The applicability and levy of Profession tax is governed by respective state Acts. For example, the Profession tax laws in Maharashtra are governed by The Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975 (‘Profession Tax Act’).

Applicability

Everyone doing business or profession – Persons who are carrying on freelancing business without any employees are also required to register themselves subject to the monetary threshold if any, provided by the respective State’s legislation. The following classes of persons are liable to pay Profession Tax:

Ceiling Limit

Collection

Compliance Requirement

Penal Provisions


The maximum amount of Profession Tax payable by a person would be restricted to INR 2,500 per annum.


Considering that the State Government has the authority to collect and levy Profession Tax, the responsibility to collect Profession Tax lies with the ‘Commercial Tax Department’ of respective states. The sum of Profession Tax collected by this Department is remitted to the Municipality Corporation of the respective state.


The compliance requirements for Professional Tax vary from State to State. In general, persons responsible for collecting and paying Profession Tax are required to seek a registration under Professional Tax and also file a return capturing the professional taxes collected and deposited into the Government treasury. In case of an employer, he needs seek professional tax registration certificate in order to pay off his own profession tax liability. Further, he is also required to obtain a Professional Tax enrolment certificate to be able to deduct taxes from his employees and pay the same into the Government treasury.


The amount of penalty or fine that would be levied in respect of any non-compliance conducted under Profession taxes would be governed by the respective States. Penalties are also leviable in case payment of profession taxes is not made on time.

Slab Rates?

The applicable slab rates for Profession Tax in Maharashtra are as under:

Monthly Income

Amount of Profession Tax For Males

Amount of Profession Tax For Females


Upto INR 7,500


From INR 7,501 to INR 10,000


From INR 10,001 onwards


NIL


INR 175


INR 200 per month (for 11 months); and

INR 300 for the 12th month


NIL


NIL


INR 200 per month (for 11 months); and

INR 300 for the 12th month

Person responsible to pay Profession Tax?

Subject to the slab rates and the monetary threshold of Profession tax as applicable to respective states, the following table summarizes who would be responsible to collect and pay Profession Tax in various cases:

Person from his / her income Profession Tax is required to be paid?

Person responsible to collect and pay Profession Tax is required to be paid?


Employees


Company


Partnership Firm


Sole Proprietor


Persons carrying on freelancing business


 


Employer


Company itself


Partnership Firm itself


Sole Proprietor themselves


Persons themselves


Exemptions

The class of persons who are exempted from the payment of Profession tax varies from state to state. For example – In the state of Maharashtra, the following classes of persons are exempted from the payment of Profession tax:

Profession Tax Registration Service

Profession Tax Registration - Rs. 1,999/-

Inclusive of GST

Other Services Offered