Professional Tax
Professional tax is a state-level tax levied on income earned through profession, trade, or employment, typically deducted monthly.
- What is a professional tax?
- Professional tax in India
- Difference between professional tax and TDS
- Who should make professional tax payment?
Professional Tax
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Professional Tax Overview
Professional Tax is a tax levied by state governments in India on individuals or entities engaged in professions, trades, or employments. It is applicable to salaried employees, professionals (like doctors, lawyers), and business owners. The tax amount varies by state and is based on income levels. Employers are responsible for deducting professional tax from employees’ salaries and remitting it to the state government. The rates and thresholds for professional tax differ across states, with annual limits and exemptions. Professional tax payments are typically mandatory and must be filed regularly, ensuring compliance with local tax regulations.
What is a professional tax?
Drawing a regular income in the form of a salary or professional fees for your services requires you to pay a professional tax. Every professional has to pay this tax to their respective state governments based on their earnings. However, the percentage of deduction differs along with states in India, and your final professional tax amount is likely to vary based on this.
Here is an in-depth look at professional tax.
Professional tax in India
If you are a salaried employee, take a closer look at your salary slip or inquire with your organisation’s HR personnel. You will learn that your employer deducts a small amount every month based on your income month along with other regular deductions. This amount accounts for your professional tax, which your employer pays to the state government on your behalf.
Suppose you are a chartered accountant, lawyer, doctor, or any other practising professional in India. In that case, you will have to pay professional tax to the state government of the place in India where you have your practice. The amount will vary as per your earnings.
Difference between professional tax and TDS
Before understanding the nuances of professional tax independently, it is important to distinguish it from another commonly mistaken parameter, TDS.
TDS in India
Tax deducted at source (TDS) is the amount deducted from your employer’s earnings or the person making payments to you. This deduction is carried out based on a pre-determined TDS slab. On which TDS is applicable, your income can come from your investment interest earnings, savings, salary, or salaries, rent payments, professional fees, etc.
The company or person making the payment have the right to deduct your TDS based on the slab corresponding to your income. So, this deduction acts like a tax that you have paid in advance, which allows you to furnish the necessary deduction documents at the time of your Income Tax Return (ITR) filing.. This will let India’s tax department know which of your earnings you have already paid tax. Based on this evaluation, you will either be exempt from paying a tax or will have to pay TDS on earnings that have not yet been taxed.
Who should make professional tax payment?
As a professional earning in India, you can pay professional tax. For an employed individual, the employer makes a professional tax payment to the state government. For self-employed professional, you need to make the professional tax payment on your own.
Timelines for professional tax payment
Payment timelines for professional tax vary based on the number of employees in an organisation.
- For businesses with over 20 employees, professional tax is typically due every month.
The payment deadline for monthly professional tax is usually the 20th of the succeeding month.
- Businesses with fewer than 20 employees may have an annual professional tax payment requirement.
The annual professional tax payment deadline often falls on March 31st of the financial year..
FAQ ON LLP ANNUAL COMPLIANCE
LLP annual compliance refers to the statutory requirements that Limited Liability Partnerships must meet each financial year, including filing forms and maintaining records.
- Form 11 (Annual Return): Details about LLP partners and changes, due within 60 days of the financial year-end.
- Form 8 (Statement of Accounts and Solvency): Declares financial performance and solvency, due by October 30.
Yes, LLPs must file income tax returns annually, with the deadline varying depending on audit requirements.
An audit is mandatory if the turnover exceeds ₹40 lakh or contributions exceed ₹25 lakh.
- Only LLPs registered under GST are required to file GST returns regularly.
