The States in which the Professional Tax is applicable and the States in Which it is not

This article discusses the states which regulate the professional tax. For this, we need to know the meaning of the term professional tax. This article discusses in detail the various states which have the professional tax imposed on their citizens and the various states which do not have the professional tax applicable to them. 

Professional Tax

What is a professional tax? Who has to pay it, and what is the criterion for payment? All this is discussed in this article, and make sure you read it to gather a whole lot of information in the same place. Professional Tax or the Profession Tax is the tax which is imposed by the State government in India. Anyone who is doing a profession has to pay a tax for the same. For example, if you are a chartered accountant, company secretary, lawyer, doctor, etc., you are required to pay a tax for it. Different countries or states have different methods of professional tax collection, but in India, we do it through the state government at the state level. However, not all states impose these taxes, and some are exempt from them. This means that this is at the discretion of the state whether taxes can be imposed, and it is not mandatory to be imposed. However, it may be noted that the Central government does not mandate this tax to be imposed, and the states which decide to impose this tax can, on their own discretion, do it. The point of discussion that should arise here is why not all the states should be exempted from this tax when it is not mandatory? Why does it even exist? Like, who would like to pay taxes for their profession? Who would like to give their own money to the government that they earn through their talent or their passion?

Applicability of Professional Tax in Indian States

Professional tax is a state tax assessed on the income received by means of profession, trade or employment. Professional tax is payable in the majority of Indian states, such as Maharashtra, Karnataka, West Bengal, Andhra Pradesh, Telangana, Gujarat, and Tamil Nadu. Professional tax must be deducted and remitted by the employers, though it would extend to self-employed professionals as well.

Who can levy Professional Tax or the Profession Tax?

The question that arises is who can levy the profession tax, and is it even constitutional? If it is, then how does it not violate the right to life and personal liberty? The profession tax is imposed on the people by the particular Municipal corporations, and maximum of the Indian states impose this duty or tax. The state government imposes this tax because it is a source of income for the State, and why would anyone leave a chance to earn money? The maximum amount that goes as a tax is Rs. 2500 per year, and it is according to the salary of the employee and the fixed slabs as well. Everyone pays this tax, even the staff members of the employers and the employees. It is mandatory to pay professional tax. The taxpayer is eligible for an income tax deduction for this payment. 

What is the Constitutionality of the Profession Tax, or how is it applicable in India?

The question that needs to be pondered upon is the constitutionality of the Profession tax. The reason behind this issue is that it is applicable in some states and in some it is not; therefore, the discretion of the states is questionable as to its definition and where this power arises from. There are so many things that one needs to consider about the people of the state, and if a state is imposing the profession tax, is it thinking about the welfare of the people? If yes, then what is that welfare associated with, and does that amount to the non-welfare policy of the other states not applying this tax? Let us look into these questions below:- The applicability of the Profession Tax is as per the Indian Constitution under Article 27,6 which provides that there shall be levied and collected a tax on professions, trades, callings, and employments, in accordance with the provisions of this Act. Every person engaged in any profession, trade, calling, or employment and falling under one or the other classes mentioned in the second column of the Schedule shall be liable to pay the state government tax at the rate mentioned against the class of such persons in the third column of the said Schedule. Provided that Entry 23 in the schedule shall apply only to such classes of persons as may be specified by the State Government by notification from time to time.

• Notwithstanding until the provisions to the contrary is made by the Parliament by law, and any law so made by the Parliament may be made either generally or in relation to any specified States, municipalities, boards or authorities.
• The power of the Legislature of a state to make laws with respect to the taxes on income accruing from or arising out of professions, trades, callings and employments.

This means that Article 276 of the Indian Constitution authorises the State government to make laws in relation to the subject of the Profession tax. It says that since the laws are made by the parliament, we cannot question the law-making power of the State government regarding the profession tax.

Which States Approve Professional Tax?

There are certain states that approve the Profession Tax and certain states which do not. Mentioned below are the states that approve the profession tax.

1. Andhra Pradesh
2. Chhatisgarh
3. Karnataka
4. Maharashtra
5. Tamil Nadu
6. Assam
7. Gujarat
8. Kerala
9. Meghalaya
10. Tripura
11. Bihar
12. Jharkhand
13. Madhya Pradesh
14. West Bengal
15. Manipur
16. Mizoram
17. Orissa
18. Puducherry
19. Punjab
20. Himachal Pradesh
21. Jammu and Kashmir
22. Nagaland
23. Sikkim
24. Rajasthan
25. Telangana

States which do not have the Profession Tax

States like Delhi, Haryana, Uttar Pradesh, Rajasthan and Goa do not have professional tax as of this date. These states do not have the benefit of registration or payment of this tax for employers and employees. The states where professional tax is not applicable are mainly due to policy choices or easy tax regimes in those regions. There are several Indian states where professional tax is not applicable. 

1. Arunachal Pradesh
2. Delhi
3. Goa
4. Haryana
5. Uttar Pradesh
6. Uttaranchal
7. Andaman and Nicobar
8. Chandigarh
9. Daman and Diu
10. Dadra and Nagar Haveli
11. Lakshadweep

Slab of the Profession Tax in various states

Maharashtra

Profession Tax Slab for Salaried Employees in Maharashtra  

What is the amount of Profession Tax Applicable?

The profession tax is not uniform in all the states, and it has a slab amount. This means that in every state approving this tax, there is a different slab amount. Now, this slab amount of the tax is based on the income, which is gross in nature and is of professionals and salaried employees, which means that the professional tax depends on the earnings of the financial year. It is deducted from the employer’s salary every month and in case it is a company, the directors of the company and the partners, the individual partners, the self-employed professionals or the owners of the business undertaken in this state, it is to be submitted depending upon their gross turnover in the preceding year. There are some cases in which the payment of the tax is fixed in nature, and that is to be paid irrespective of the money you earn in a financial year. This means that in some cases it does not matter in which company what turnover is arising, it is fixed and the amount so fixed is the only amount that has to be paid as for instance in West Bengal, a person who owns a factory has to pay the tax for the profession he is practicing only if the preceding year turnover is greater than Rs.5 lakh and in case of companies there is a mandatory payment of Rs. 2,500 each year as a professional tax irrespective of the turnover.

Who deducts the Professional Tax?

The question that arises is that when we know what the tax is, who subtracts the tax?   The person who owns a business is responsible for subtracting the professional tax from the salaries of his employees and then paying the amount so collected to the appropriate government department. When such an amount is collected and given to the concerned department of the government, he also has to file a return based on what is given within a specified amount of time. The return which is filed should include proof that you have paid the tax or the owner of the business has paid the tax. Circumstances in which the payment proof is not enclosed with the return application, the return shall be deemed to be incomplete, and then the whole procedure will have to be followed again, as it will be incomplete under the provisions of Section 16(iii) of the Income Tax Act. Therefore, the professional tax is deducted by the owner of the business under whom you work.

Registration

The question is that when the professional tax is deducted by the owner of the business, who registers the professional tax? What you need to do for the registration process is apply for the registration certificate to your state tax department within thirty days of employing staff for your business, or in other words, simply by applying for the registration certificate is the go to your state tax department within a month of employing staff under you. If you work in more than in one place, then you will have to apply separately to each authority, and the place of work comes under their respective jurisdictions. Now that you know the taxes of different states, make sure you pay them, and if not, make sure that your state does not have the provision of the Profession Tax from the list mentioned above.  

Professional tax registration for tax over is compulsory for employers where the tax is leviable. Employees must register themselves and their employees with the concerned State Tax Department. Then remit the tax on a monthly basis as per the slab. Employers and professionals must be aware of the late payment or non-filing penalty and interest.

GST and Professional Tax - No Overlap

GST (Goods and Services Tax) is not applicable to professional tax. Professional tax is a direct tax imposed by state governments, and GST is an indirect tax on the supply of goods/services and is controlled by the central government. Therefore, GST is not applicable to professional tax payments or transactions.

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