What is Payment of professional tax?
Professional Tax is a tax levied by state governments in India on individuals or professionals engaged in various professions, trades, or employments. It is applicable to all salaried employees, self-employed individuals, and professionals like doctors, lawyers, chartered accountants, etc. The professional tax is paid either by the employer or the employee, depending on the circumstances.
Key Features of Professional Tax:
Applicability:
Salaried Employees: If you are employed in a company or organization, the employer typically deducts the professional tax from your salary.
Self-Employed: Professionals like doctors, lawyers, freelancers, and others need to pay the tax directly to the state government.
Amount:
The professional tax amount varies based on the salary of the employee and the state in which they are employed, as each state has its own regulations and limits regarding professional tax.
The tax is typically paid on a monthly basis, but in some states, it may be required to be paid annually.
Threshold:
There is a minimum income limit for professional tax, meaning individuals earning below a certain threshold are exempt from paying it. For instance, individuals earning below a certain amount may not be liable to pay this tax.
Rates:
The tax rates vary by state. For example, the professional tax may be higher for higher-income brackets. Some states may have a fixed monthly amount, while others may have a progressive system depending on income.
Employer’s Responsibility:
In many cases, the employer is responsible for deducting professional tax from employees' salaries and remitting it to the state government. The employer also needs to ensure that they are compliant with the state rules regarding professional tax.
State-Specific:
Professional tax is a state-level tax, and each state in India can have different regulations, exemption limits, and rates.
Penalty for Non-Compliance:
Failure to pay professional tax can result in penalties or fines, both for individuals and businesses, and in some cases, even legal action can be taken.