Professional Tax is comes under the ambit of Direct taxation which is levied in India by some state governments from the individuals who are earning more than the certain limit. As the professional tax comes under the authority of state government so no uniform slab of income is applicable for its applicability. However, the limit has been set to Rs. 2500 per year
It is levied on all kinds of professions, trades, and employment and levied based on the income of such profession, trade and employment.
It is also levied on employees, a person carrying on business including freelancers, professionals, etc., subject to income exceeding the monetary threshold if any.
Why does professional tax vary for different people?
With Joint reading of Article 246 and 276 of Constitution of India , We find Both Center and States or in other terms Parliament and state legislature both have the power to levied tax on different subject.
As per Article 246 of the Constitution of India, only Parliament has the exclusive power to make laws with respect to the Union List which includes taxes on income. The state has the power to make laws only with respect to the Concurrent and State list.
But Under Article 276 of Constitution of India , States Government are also Empowered to make laws with respect to professional tax though being a tax on income which deals with tax on professions, trades, callings and employment.
No uniform law across Nation
Since professional tax is levied by the state government, it tends to differ for various states. Each state declares a slab and the professional tax is deducted on the basis of these slabs. However, there are few states and union territories in India that do not charge professional tax too. It is paid by dividing the annual professional tax due into 12 equal instalments, which are to be paid every month. February, as a month, is an exception where the tax is higher than the other months.
It may be noted that professional tax is a deductible amount for the purpose of Income-tax Act, 1961 and can be deducted from taxable income.
Who is responsible to collect and pay professional tax?
Professional tax is collected by the Commercial Tax Department. The commercial tax department of the respective states collect it which ultimately reaches the fund of municipality corporation.
Persons responsible to pay professional tax
In case of employees, an employer is a person responsible to deduct and pay professional tax to the State Government subject to the monetary threshold if any provided by respective State’s legislation.
An employer (corporates, partnership firms, sole proprietorship etc) also being a person carrying on trade/profession is also required to pay professional tax on his trade/profession again subject to the monetary threshold if any provided by respective State’s legislation.
In such a case, the employer needs to register and obtain both a professional tax registration certificate to be able to pay professional tax on his trade/profession and professional tax enrolment certificate to be able to deduct the tax from his employees and pay. Further, separate registration may be required for each office depending on the respective State’s legislation.
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.
However, a professional tax levy is subject to the exemption provided by the respective State to certain categories
What is the procedure to pay professional tax? Is any return to be filed?
This is again a State-specific query. However, in general, a professional tax may be paid either online/offline. Further, depending on the State’s requirement, professional tax returns also need to be filed at specified intervals.
Consequences of violation of professional tax regulation
While the actual amount of penalty or penal interest may depend on the respective State’s legislation, a penalty may be levied by all such states for not registering once professional tax legislation becomes applicable.
Further, there are also penalties for not making the payment within the due date and also failing to file the return within the specified due date.
Bihar Professional Tax
As we all Know Professional Tax is a state specific subject so every states have different set of laws for levying the professional tax. Under the Article 276 of the Constitution Of India , Bihar as a State is also empowered to levy taxes on different types of professional who are earning more than the prescribe slab and have own set of rules of registration , filling and other exemptions.
Bihar Professional Tax Act, 2011
The Commercial Taxes Department, regulated under the Bihar Government, is responsible for collecting professional tax dues from professionals in the state. The Bihar Tax On Professions, Trades, Callings And Employments Act, 2011 and The Bihar Professional Tax Rules, 2011, individuals engaged in a business or profession are levied a Profession Tax of Rs.2500 (as the maximum) and Rs.1000 per annum (as the minimum).
Applicability of Bihar Professional Tax Act, 2011
It is applicable on
- Incorporated Companies
Levy and charge of tax
Under Section -4 Bihar Professional Tax 2011
(1) There shall be levied and collected a tax on professions, trades, callings and employments in accordance with the provisions of this Act:
Provided that the tax payable by a person under this Act in respect of a year shall not exceed two thousand five hundred rupees.
(2) Every person engaged in any profession, trade, calling or employment in the State of Bihar shall be liable to pay the tax in respect of his Profession, Trade, Calling or employment at the rate specified in the Schedule appended to this Act.
Registration under Bihar Professional Tax 2011
Under section 6 of (1) Every employer, not being an officer of the State Government or the Central Government, liable to deduct tax under section 5 shall be granted a registration number by the Tax assessing authority in the prescribed manner.
(2) Every Tax assessee liable to pay tax under this Act, other than a person earning salary or wages in respect of whom the tax is payable by his employer, shall be granted an enrolment number by the Tax assessing authority in the prescribed manner.
(1) Every employer required to be registered by Section 5 shall apply, in Form PT-I, for registration under the Act to the In-charge of the circle within whose jurisdiction the office of the employer is situated. Such application shall be submitted within seven days of the employer being required to be registered and shall be filed in electronic manner on the official web-site of the Commercial Taxes Department and the said application shall be processed in the manner hereinafter specified:
Procedure of Registration
(2) (a) Every employer shall declare his Permanent Account Number, name as per PAN, mobile number, email address and any other information as required in FORM PT-I on the official website of the Commercial Taxes Department.
(b) The Permanent Account Number shall be validated online by the official website of the Commercial Taxes Department from the database maintained by the Central Board of Direct Taxes.
(c) The mobile number shall be verified through a one-time password sent to the said mobile number, and
(d) The email address declared shall be verified through a separate one time password sent to the said email address.
(e) On successful verification of PAN, mobile number and email address, the applicant shall electronically submit an application in FORM PT-I alongwith documents specified at the official websites of Commercial Taxes Department.
(f) On successful submission of registration application under clause (e), an acknowledgment shall be issued electronically to the applicant.
Tax Slab are given here:-
Tax Returns and payments
Under Section – 7 of Bihar Professional Tax 2011 ,
(1) Every employer registered under this Act and every enrolled person shall furnish such returns in such form and manner and for such period as may be prescribed.
(2) The tax due under this Act shall be deposited by every employer registered under this Act and every enrolled person in such manner as may be prescribed
(3) Where an employer or enrolled person, without reasonable cause, fails to file such return or defaults in paying the tax within the prescribed time, the Tax assessing authority may, after giving him a reasonable opportunity of being heard, impose upon him a penalty not exceeding rupees one hundred for each month of delay.
(1) Every employer registered under the Act shall furnish to the prescribed authority an annual return in form PT-VIII containing details of the tax deducted by him in respect of the year, on or before the end of the month of November of every year.
(2) Every person enrolled under the Act shall furnish to the prescribed authority an annual return in form PT-IX on or before the end of the month of November of every year.
(3) The returns referred to in sub-rule (1) or sub-rule (2) shall be filed and be disposed of in such manner as the Commissioner may, by notification, specify.
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