Professional tax (PT) compliance involves understanding and fulfilling the mandatory state-level tax obligations for income earned from a profession, trade, or employment in India. Compliance rules, including registration, payment, and return filing, vary significantly between states.
Key requirements for compliance
Applicability
- Location-based: PT applies in the 17 Indian states that have enacted their own PT laws under Article 276 of the Constitution.
- Salaried employees: Employers are responsible for deducting PT from the monthly salaries of their employees and remitting it to the state government.
- Self-employed individuals and businesses: Professionals like lawyers, doctors, and chartered accountants, as well as business owners and traders, must register and pay the tax directly to the state government.
Registration
- Two types of certificates:
- Professional Tax Registration Certificate (PTRC): Required for employers who deduct tax from their employees' salaries.
- Professional Tax Enrolment Certificate (PTEC): Required for self-employed individuals and business owners.
- Timeline: Registration is typically mandatory within 30 days of commencing employment or a profession, but the exact deadline depends on the state.
- Multiple locations: Businesses with branches in different states may require separate registrations for each location.
Payment and returns
- Frequency: The schedule for paying PT and filing returns varies by state and may depend on the number of employees.
- Gujarat: Employers with over 20 employees pay monthly, while those with fewer than 20 pay quarterly.
- Maharashtra: For employers with more than 20 employees, the monthly return is due on the 20th of the next month. For those with fewer, the quarterly return is due on the 30th of the next month.
- Online portals: Many state governments provide online portals for registration, payment, and filing returns.
Deductions and exemptions
- Tax deduction: The total PT amount paid during a financial year is deductible from your taxable income under the old tax regime.
- Exemptions: Certain individuals are exempted from paying PT, though eligibility varies by state. Common exemptions include:
- Senior citizens (age 65 and above in many states)
- Individuals with permanent disabilities
- Members of the armed forces
Consequences of non-compliance
Failing to meet PT obligations can result in serious penalties.
- Penalties: Fines for delayed registration, late payment, or non-filing of returns can include a percentage-based penalty, a fixed daily amount, or a higher penalty for continued non-compliance.
- Interest: State governments may levy interest on the overdue tax amount.
- Recovery proceedings: Officials have the power to recover unpaid tax, interest, and penalties by seizing a defaulter's assets or attaching their bank account.
- Legal action: In some cases, persistent non-compliance can lead to legal proceedings