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An Intro to Profession Tax

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     on  04 February 2013    

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Profession Tax

 

What is Profession Tax?

 

“The meaning of profession tax is the tax on profession”. Profession tax is a kind of duty that is levied on the income of professionals engaged in various occupations. Profession tax is levied by the municipal corporations for the state government.

 

Every employer is liable to deduct the tax from the salary of the employee and pay it to the account of the state government. The quantum of tax is decided on the income of the employee. Profession taxes being a state subject, today not all the states levy it. The states that levy profession tax are:

 

“Andhra Pradesh,  Assam, Bihar, Chhattisgarh, Gujarat, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Orissa, Pondicherry, Tamil Nadu, Tripura, West Bengal”.

 

Procedure for Registration of Profession Tax:

 

The profession tax has to be registered under the state government. All Companies or Firms have to register the profession tax under the corporation/Municipal of state. Within 60 days of incorporate they must register the same. Documents are required for profession tax registrations;

 

1) Certificate of Incorporation.

2) Capital Contribution Details of the organization.

3) PAN copy of the Organization.

4) Details of the Employers.

5) Details of the Employees and their salaries.

 

Registration fees as per the organization Paid up capital contribution based. The slab rate of capital contributions are:

 

Sl. No.

Capital Contribution

Tax to be imposed

1

Capital up to Rs.99,999/-                            

 

Rs.100/-

2

Capital Rs.1,00,000/- to Rs.1,99,999/-     

 

Rs.200/-

 

3

Capital Rs.2,00,000/- to Rs.2,99,999/-    

Rs.300/-

 

4

Capital Rs.3,00,000/- to Rs.4,99,999/-   

Rs.400/-

 

5

Capital Rs.5,00,000/- to Rs.9,99,999/-  

Rs.500/-

 

6

Capital Rs.10,00,000/- Above                  

Rs.1000/-

 

 

As per the state government rules based the rate of tax deducting and paying into the government is,

 

For Employees earning salary in six months period:

 

Sl. No.

Six months income (Rs.)

Tax to be imposed

1

Salary Up to Rs.21,000/

No Tax

 

2

 

Salary Rs.21001/- to Rs.30,000/-        

Rs100/-

 

3

 

Salary Rs.30,001/- to Rs.45,000/-      

Rs.235/-

4

Salary Rs.45,001/- to Rs.60,000/-     

 

Rs.510/-

5

Salary Rs.60,000/- to Rs.75,000/-    

 

Rs.760/-

6

Salary Rs.75,000/- Above                  

 

Rs.1095/-

 

 

Every employer has to deduct the profession tax from their employee’s salary on correct time. This duty qualifies for IT deductions. As laid down by section 16(iii) of the IT Act, professional tax on service or duty on service imposed by the state under article 276(2) of the Constitution of India is permissible in the form of a deduction from the salary earnings. Professional tax has to be paid by the employee and this is the precondition for him or her for being eligible for the deduction. If he or she has not paid it, then no deduction will be allowed.

 

Due Date of deducting and paying the profession tax is first half yearly tax have to deduct from the employee’s salary before 30th September and the deducted amount should be pay to the government on 30th September. The second half yearly deduction amount should be pay to the government on 31st March.

 

The employer is liable to pay 1% Interest/Penalty for non-registration or nonpayment of tax. The interest portion is to be calculated on a monthly basis only.

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