Professional Tax - Everthing you need to know

What is Professional Tax?

Professional tax is a tax that is levied by a state government on all individuals who earn a living through any medium. This should not be confused with the definition of professionals that indicates people such as doctors.

This is a tax that is to be paid by every single earning individual. The calculation and amount collected may differ from one state to another but it has a limit of Rs. 2500 per year.

Who are the Professional Taxpayers?

The following are the individuals who are liable to pay Professional Tax:

• Salary or wage holders

• Members of HUFs (Hindu Undivided Families)

• Earning individuals residing within boundaries and 

• An association of a body or person, public or private limited company, any cooperative society, and others

Who Collects Professional Tax?

Professional tax is collected by the employers from the monthly salaries and the Commercial Tax Department is responsible for collecting this tax.

It is then paid by them to the government failing which they can have penalties imposed on them for not collecting or failing to pay the professional tax. If you are not working for anyone then you are liable to pay the professional tax yourself.

• For professionals not working with an employer they can register for it by applying through a form.

• Once the form is received, a registration number will be issued to the individual.

• Payment of the professional tax can be made under these registration numbers at banks.

• It is also worth noting that, in some states, the government also provides rebates on the taxes if it is paid in a lump sum for a few years together so it is worth enquiring about the rules of professional tax in your state.

The following are the two specific certificates that employers need to register for to pay and charge taxes:

• Professional tax enrolment certificate: For clearing the liabilities with the state government, the professional tax enrolment certificate authorises the employer to deduct professional tax from the employees’ salaries.

• Professional tax registration certificate: The professional tax registration certificate certifies the employer to pay professional tax on their trade or business.

What is the Professional Income Tax Limit?

In 1949, the professional tax was introduced, and the limit of tax was set Rs.250. The limit was increased by Rs.2,500 in 1988 and the professional tax amount cannot exceed Rs.2,500. The tax amount depends on the state of employment and the income slab of the employee.

Professional Tax Applicability

Professional Tax is applicable for the below-mentioned individuals and entities:

• Companies

• Firms

• LLPs

• Corporation

• Societies

• HUF

• Associations

• Clubs

• Legal practitioners such as solicitors

• Contractors

• Architects

• Engineers

• Insurance agents

• Chartered Accountants

• CS

• Surveyors

• Tax consultants

• Management consultants

• Medical representatives such as doctors, medical consultants, and dentists.

Professional Tax in West Bengal

Monthly salary (in Rs.) Tax (in Rs. Per month)

Up to Rs.10,000 Nil

Rs.10,001 to Rs.15,000 Rs.110

Rs.15,001 to Rs.25,000 Rs.130

Rs.25,001 to Rs.40,000 Rs.150

More than Rs.40,000 Rs.200

Due Date and Penalty for Professional Tax Payment in West Bengal

Professional tax in West Bengal must be paid online by enrolled individuals by July 31 of each fiscal year, or earlier. However, registered employers are required to pay a monthly fee. The West Bengal State Government fines people and businesses if there is a delay in professional tax payment, or a professional tax return is not filed within 90 days of the eligibility date.

Concerned people/companies are required to pay interest at a monthly rate of 1% on unpaid tax as a result of late payment.