Overview of Professional Tax Registration

Professional Tax refers to the tax the State Government levies for the infrastructure it provides to its citizens to carry out their profession smoothly. This tax is levied on all kinds of professions, trades, and employment, and its applicability is based on the income of the following:

• Profession
• Trade
• Employment

Professional Tax varies from state to state. Different rules and regulations govern it depending on the state; however, all states follow a slab system based on income to levy professional tax. Further, individuals carrying out freelancing businesses without any employees must obtain a Professional Tax Certificate according to the pecuniary threshold, if any, provided by the respective State Authorities.

Types of Professional Tax Certificates

The types of Professional Tax Certificates are:

PTEC (Professional Tax Enrolment Certificate)

This type of professional tax is paid by the business entity, i.e., a Private/Public Limited Company, owner, or professional, i.e., Sole Proprietor or Director, through this certificate.

PTRC (Professional Tax Registration Certificate)

Here, the Government or Non-Government employer deducts the tax from the employee's salary and deposits the same to the government.

Note: The professional tax imposed is subject to exemptions provided by the respective state to particular categories.

Benefits of Professional Tax Registration

The benefits of Professional Tax Registration are given below:

Imposes Minimal Restrictions

Compliance with Professional Tax is simple, ensuring a smooth registration process with minimal restrictions.

Helps in Avoiding Penalties

Paying Professional Tax is mandatory by law. Timely payment helps avoid penalties and any punitive action against the employer or a self-employed person.

Enables a Smooth Registration Process

Professional Tax compliance is straightforward, allowing a hassle-free registration process.

Supports Development and Welfare Programs

Professional Tax serves as a revenue source for state governments, enabling them to implement various welfare and development schemes.

Allows Tax Deduction Claims

Employers or self-employed individuals can claim a deduction for the professional tax they have previously paid.

Who is Liable for Professional Tax Registration?

The liability for tax payment depends on the applicable state regulations. The following entities are eligible for Professional Tax Registration:

• Individuals
• Public/Private/One-Person Companies
• Partnerships
• Co-operative Societies
• Associations of Persons
• HUF (Hindu Undivided Family)

Essential Documents Required for Professional Tax Registration

The essential documents required for Professional Tax Registration are as follows:

• Application Form
• For Companies: COI, AOA, MOA, and PAN (attested by the Director)
• Directors’ Documents: Address proof, identity proof, and passport-size photos of all directors
• Bank Details: Bank account details of the company, including a bank statement and a canceled cheque
• Registered Office Proof: Rent agreement (for rented property) or NOC from the owner
• For Companies: Board Resolution
• For Partnerships: Declaration of consent by the concerned partner, along with salary and attendance register

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Procedure for Professional Tax Registration

The procedure for Professional Tax Registration varies by state. Additionally, returns must be filed at specified intervals as per the state's requirements. Professionals or employers seeking registration must follow the steps below:

1. Filing the Application with Required Documents

   • The applicant must complete the application form and submit the necessary documents.

2. Submission to the Concerned State Government and Tax Department

   • The application, along with the required documents, must be submitted to the respective state government.
   • A copy should also be provided to the tax department.

3. Scrutiny by the Tax Authority

   • The tax authority will review the application to verify the accuracy of the submitted information.

4. Issuance of Registration Certificate

   • Upon successful verification, the authority will issue the Professional Tax Registration Certificate.

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Penalties Imposed for Violating Professional Tax Regulations

Failure to comply with professional tax regulations results in penalties imposed by the state government. The penalty amount varies by state and applies in the following cases:

1. Failure to Obtain Registration

   • A penalty is imposed for the period during which the individual remains unregistered after becoming liable.

2. Late Deposition

   • A penalty is charged for delays in depositing the required tax amount to the government.

3. Non-Deposition of Amount

   • If the tax amount is not deposited, it can be recovered along with interest from the defaulter’s assets.
   • Authorities may also attach the defaulter’s bank account.
   • In severe cases, prosecution may be initiated.
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Specific Penalties

• Rs. 5 per day for delayed registration certificate obtainment.
• 10% of the tax amount for late or non-payment of professional tax.
• Rs. 1000 penalty for late return filing, increasing if delayed beyond one month.
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Persons Accountable for Collecting and Paying Professional Tax

Professional tax is applicable to all income-earning individuals, with collection and calculation varying by state. The state’s Commercial Tax Department collects the tax either monthly or annually through the PTEC or PTRC Certificate. The maximum annual amount is Rs. 2500.

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