How to Start a PROFESSIONAL TAX REGSITRATION

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Overview of Professional Tax Registration

Taxation serves as a primary source of revenue for the Government of India. Professional Tax is a specific type of tax imposed on all salaried individuals, with the deduction typically visible on their salary slips. This tax, collected by the State Government, varies across states as each state implements its own set of laws, rules, and regulations. Professional Tax applies to various professions, trades, and employments, based on income levels.

What is Professional Tax?

Professional Tax is a direct tax levied by the State Government on individuals earning income through professions such as Company Secretaries, Lawyers, Chartered Accountants, Doctors, and others. It is also applicable to employees of non-government institutions.

Although similar to Income Tax, the distinction lies in the governing authority:

  • Professional Tax is levied by the State Government.
  • Income Tax is levied by the Central Government.

The maximum annual Professional Tax has been capped at ₹2,500. Despite this, the tax is considered regressive since individuals with higher salaries pay the same fixed amount.

Components of Professional Tax

1. Professional Tax for Employers

  • Business entities must obtain a Professional Tax Registration/Enrolment Certificate from the respective State Government within 30 days of starting operations.
  • Employers are required to pay an annual tax amount of ₹2,500 to the State Government.

2. Professional Tax for Employees

  • Employees whose income falls under the state's professional tax slab are required to pay the prescribed tax.
  • This amount is deducted from their salaries by the employer and remitted to the government.

Professional Tax Rate

  • The annual Professional Tax Rate is capped at ₹2,500.
  • The rate is determined based on the tax slab applicable to the gross income of salaried individuals.
  • Employers are responsible for deducting this tax monthly from employees’ salaries and remitting it to the respective State Government.
  • Self-employed individuals or professionals are required to pay this tax directly to the government.

States Implementing Professional Tax

The following states have levied Professional Tax:

  • Karnataka
  • West Bengal
  • Andhra Pradesh
  • Chhattisgarh
  • Kerala
  • Maharashtra
  • Tamil Nadu
  • Gujarat
  • Assam
  • Odisha
  • Tripura
  • Madhya Pradesh
  • Meghalaya
 

Benefits of Professional Tax Registration

Professional Tax Registration offers several advantages, including the following:

  1. Minimal Restrictions

    • The compliance process involves minimal restrictions, making it straightforward and easy to follow.

  2. Timely Compliance Avoids Penalties

    • Professional Tax is a legal requirement. Non-compliance can result in fines or prosecution.
    • Employers and employees can avoid such penalties by paying the tax on time, as per their state’s tax slab rates.

  3. Simplified Registration Process

    • The procedures for registration, follow-ups, and other proceedings are simple and hassle-free.

  4. Supports Welfare and Development Programs

    • The revenue collected through Professional Tax is utilized by the State Government for various welfare and developmental initiatives.

  5. Access to Professional Assistance

    • Tax professionals are available to handle tax-related matters, ensuring that individuals and businesses are not burdened by complex tax issues.

  6. Tax Deduction Benefit

    • Both employers and employees can claim deductions for Professional Tax paid in previous years, reducing their overall tax liability.

Liability for Payment of Professional Tax

The following categories of individuals and entities are liable to pay Professional Tax:

  1. Individuals
  2. Public, Private, and One-Person Companies
  3. Partnership Firms
  4. Co-operative Societies
  5. Associations of Persons (AOP)
  6. Hindu Undivided Families (HUF)

Exemptions from Paying Professional Tax

The following individuals and entities are exempted from the payment of Professional Tax:

  1. Parents of Children with Disabilities

    • Parents whose children suffer from permanent or mental disabilities, or any similar condition, are exempted from Professional Tax.

  2. Armed Forces Personnel

    • Members serving under the Army Act, 1950, Air Force Act, 1950, and Navy Act, 1957, including auxiliary forces and reservists, are exempted from Professional Tax.

  3. Senior Citizens

    • Individuals aged 65 years or above are not liable to pay Professional Tax.

  4. Persons with Disabilities

    • Individuals with permanent physical disabilities, including blindness, are exempted from Professional Tax.

  5. Women Agents and Directors of Savings Schemes

    • Women working as agents under the Mahila Pradhan Kshetriya Bachat Yojana or serving as Directors in any small savings scheme in the state are exempted from Professional Tax.

  6. Guardians of Persons with Disabilities

    • Parents or guardians of individuals with mental or permanent disabilities are exempted from this tax.

  7. Temporary Workers in the Textile Industry

    • Badli workers employed in the textile industry are also exempted from Professional Tax.

Documents Required for Professional Tax Registration

To register for Professional Tax, the following documents must be submitted:

  1. Application Form

    • The completed online application form and its hard copy.

  2. For Companies

    • Certificate of Incorporation (COI), Memorandum of Association (MOA), Articles of Association (AOA).
    • Company PAN card (attested by the Director).

  3. For Proprietors

    • Self-attested PAN card of the proprietor.

  4. List of Directors and Employees

    • Names of all Directors and employees along with:
      • Identity proof.
      • Address proof.
      • Passport-sized photographs.

  5. Bank Account Details

    • Bank account details of the company, including:
      • Bank statement.
      • Cancelled cheque.

  6. Registered Office Proof

    • Proof of the business's registered office.
    • For rented premises, a No Objection Certificate (NOC) from the owner.

  7. Additional Documents

    • For Companies: Board Resolution.
    • For Partnerships: Declaration of Consent by the concerned Partner.

  8. Employee Records

    • Salary and attendance register.

Procedure for Professional Tax Registration

The process for Professional Tax Registration varies across states and is subject to their respective tax slabs. After registration, professional tax returns must be filed within the prescribed time as per the state's requirements. Employers or professionals seeking registration should follow these steps:

Offline Application Process

  • Submit the application form along with the required documents and prescribed fee to the respective state government office.

Online Application Process

Step 1: Filing the Application Online

  • Visit the Commercial Taxes Department (CTD) portal of the respective state and fill out the online application form.

Step 2: Submitting Hard Copy

  • Once the online application is completed, submit the hard copy of the form along with the required attested documents to the concerned department.

Step 3: Examination by Tax Authorities

  • The tax authority will review the submitted application and scrutinize any discrepancies or incorrect information.

Step 4: Issuance of Registration Certificate

  • If the application meets all the requirements, the authority will approve it and issue the registration certificate.
  • If discrepancies are found, the applicant will be required to provide clarifications or additional information within the stipulated time.

Forms of Professional Tax

Professional Tax can be classified into two categories:

1. Professional Tax Certificate of Enrolment

  • Applicable to individuals engaged in business, employment, trade, or profession.
  • Individuals are required to pay Professional Tax to the respective State Government where their business is located.
  • This is done by obtaining a Certificate of Enrolment.

2. Professional Tax Certificate of Registration

  • Applicable to employers who are responsible for deducting Professional Tax from their employees’ salaries.
  • Such employers must apply for a Certificate of Registration to fulfill this obligation.

Process for Professional Tax Registration

The steps for Professional Tax Registration are as follows:

1. Business Registration/Incorporation

  • The first step is to register the business, depending on its structure (Proprietorship, Partnership, Limited Liability Partnership, or Private Limited Company).

2. Application to Professional Tax Department

  • Submit the online application for Employer Registration (Enrolment Certificate) to the Professional Tax Department.

3. Obtaining the Certificate of Enrollment (EC)

  • After submitting the application, provide the necessary supporting documents to the department and obtain the Certificate of Enrollment (EC).

    Certificate of Enrollment

    Every business entity must obtain a Certificate of Enrollment (EC) from the Professional Tax Officer within 30 days from the date of commencement of business. This registration is mandatory, regardless of whether the business has employees or not. Once the Certificate of Enrollment is obtained, the business must pay the applicable Professional Tax annually at the specified time and rate. These details will be mentioned in the certificate itself.

    Employers who fail to register or obtain the Enrollment Certificate within the prescribed time will be penalized by the assessing authority. The Professional Tax for employers is fixed at ₹2,500 for Companies, LLPs, and Partnerships.

    Accountability for Collecting and Paying Professional Tax

    Professional Tax must be paid by individuals earning income through their profession, trade, or employment. Self-employed individuals are responsible for directly paying the tax. However, for salaried employees, the employer is liable for deducting and paying the tax on their behalf. This tax should be paid based on pre-determined tax slabs, either annually or monthly, to the Commercial Tax Department of the respective state, by the due date prescribed by the relevant authority.

    Professional Tax Slab and Monthly Salary Slab for Different States (FY 24-25)

    State Monthly Salary Slab Professional Tax Slab
    Karnataka ₹15,000 and below ₹150 per month (up to ₹15,000); ₹2,500 annually for higher salaries
    West Bengal ₹15,000 and below ₹60 per month (up to ₹15,000); ₹2,500 annually for higher salaries
    Andhra Pradesh ₹15,000 and below ₹150 per month (up to ₹15,000); ₹2,500 annually for higher salaries
    Chhattisgarh ₹15,000 and below ₹150 per month (up to ₹15,000); ₹2,500 annually for higher salaries
    Kerala ₹15,000 and below ₹50 per month (up to ₹15,000); ₹2,500 annually for higher salaries
    Maharashtra ₹7,500 - ₹10,000 ₹175 per month (up to ₹10,000); ₹2,500 annually for higher salaries
    Tamil Nadu ₹15,000 and below ₹50 per month (up to ₹15,000); ₹2,500 annually for higher salaries
    Gujarat ₹15,000 and below ₹150 per month (up to ₹15,000); ₹2,500 annually for higher salaries
    Assam ₹15,000 and below ₹50 per month (up to ₹15,000); ₹2,500 annually for higher salaries
    Odisha ₹15,000 and below ₹50 per month (up to ₹15,000); ₹2,500 annually for higher salaries
    Tripura ₹15,000 and below ₹150 per month (up to ₹15,000); ₹2,500 annually for higher salaries
    Madhya Pradesh ₹15,000 and below ₹200 per month (up to ₹15,000); ₹2,500 annually for higher salaries
    Meghalaya ₹15,000 and below ₹50 per month (up to ₹15,000); ₹2,500 annually for higher salaries

    Note: The salary slabs mentioned for professional tax may vary slightly based on income brackets within each state.

Penalties for Violation of Professional Tax Regulations

Professional Tax is governed by rules and regulations set by the relevant authorities, and adherence to these regulations is mandatory. Failing to comply with these requirements can result in penalties, which vary from state to state. Here are some situations in which penalties may be imposed:

  1. Failure to Get Registration
    If an individual or business fails to obtain registration within the prescribed time, they will be liable to pay a penalty for the period during which the business remained unregistered.

  2. Failure to Pay the Prescribed Tax or Late Payment
    Individuals who fail to pay the tax on time will be required to pay a late fee in addition to the tax amount.

  3. Non-Depositing of Tax Amount
    If the tax amount is not deposited, the authorities have the power to recover the amount along with penalties and interest from the individual's assets. In some cases, prosecution may be filed. Additionally, the state government can impose penalties for delayed payments or failure to file returns on time.

  4. Major Penalties for Defaulters

    • If the Professional Tax Registration Certificate is obtained after the due date, a penalty of ₹5 per day will be charged.
    • For delayed payment or nonpayment of Professional Tax, a penalty of 10% of the due amount will be imposed.
    • If the applicant fails to file returns on time, they will be fined ₹1,000. If the delay continues for more than a month, the penalty increases to ₹2,000.

CA Anytime Assistance for Professional Tax Registration

To ensure seamless and legally-compliant Professional Tax Registration, CA Anytime offers expert guidance through every step of the process. Our professionals assist in registering and ensuring compliance with all necessary regulations, allowing your business to function smoothly in India.

We advise you to seek assistance from an expert with experience in Tax Registration to avoid potential pitfalls. Our team at CA Anytime will guide you through the process while ensuring a cost-effective solution tailored to your needs.

For registration, we only require the necessary information from your side, along with the prescribed fee, to initiate the process and ensure compliance. Let CA Anytime help you navigate the complexities of Professional Tax Registration and compliance efficiently.

 

Why CA Anytime?

CA Anytime is a platform dedicated to meeting all your legal and financial needs while connecting you with reliable professionals. Our clients consistently express satisfaction with the legal services we provide, as we focus on minimizing complex legal requirements. You can track the progress of your case on our platform at any time. Our knowledgeable professionals are always available to answer any queries you may have regarding Professional Tax.

Here’s why you should choose CA Anytime:

  • Comprehensive Legal Support: We are a platform that coordinates to meet all your legal requirements, offering seamless services.
  • Expert Team: We connect you with a team of experienced professionals who can assist you in every aspect of Professional Tax and more.
  • Simplified Processes: Our main focus is to simplify the legal procedures and make it easier for our clients to navigate the requirements.
  • Accessible Assistance: Have questions? We are just a phone call away to provide guidance on any Professional Tax-related matters.
  • Dedicated Team: Our team is committed to helping and guiding you through each step of the process.
  • Reliable and Trustworthy: We prioritize reliability and trust, ensuring our clients always have peace of mind.
  • Quality Service: We guarantee top-quality service, ensuring our clients are satisfied with our work.

Professional Tax Registration is an important step for every employer and self-employed individual. It contributes to the welfare of the state where the business operates. Delays in filing or payment could result in penalties, so it's crucial to complete the process on time. CA Anytime offers a wide range of services, including assistance with Professional Tax Registration compliance. Contact CA Anytime professionals to help guide your business through the necessary steps.