Prof. tax
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
22 March 2010
Hi, my queries regarding Payment of Prof. Tax payable by a company are as follows:
1) Is a Director counted as employee while determining the annual p. Tax Liability of a company? Suppose a Company has one employee & 2 directors, will the company be liable for Rs. 2000/- P. tax or 2500/-
2) In case a company is formed and established in a middle of year say August 2009, Does it have to pay Prof. tax on proportionate basis or for full year of 2009- 2010.
3) Further I assume that Prof. Tax is to be deducted only on salary withdrawn. If a person is appointed director of a company in August but takes salary from October onwards, does he have to pay Prof. Tax for 2 months of August & September?
Kindly respond back as soon as possible.
1) Is a Director counted as employee while determining the annual p. Tax Liability of a company? Suppose a Company has one employee & 2 directors, will the company be liable for Rs. 2000/- P. tax or 2500/-
2) In case a company is formed and established in a middle of year say August 2009, Does it have to pay Prof. tax on proportionate basis or for full year of 2009- 2010.
3) Further I assume that Prof. Tax is to be deducted only on salary withdrawn. If a person is appointed director of a company in August but takes salary from October onwards, does he have to pay Prof. Tax for 2 months of August & September?
Kindly respond back as soon as possible.
Querist : Anonymous
Querist :
Anonymous
(Querist)
10 April 2010
Awaiting for some response on the matter
10 August 2024
Here’s a detailed response to your queries regarding Professional Tax (PT):
### 1. **Is a Director Counted as an Employee for Professional Tax?**
Yes, a director can be counted as an employee for the purpose of Professional Tax if they are drawing a salary or remuneration. The exact treatment can vary based on the state’s professional tax regulations, but generally:
- **For Professional Tax Calculation**: Directors who receive a salary or remuneration are often considered employees for the purposes of calculating professional tax.
- **Liability Calculation**: If a company has one employee and two directors who receive a salary, the company typically needs to pay Professional Tax on the total number of employees, including directors drawing salaries. The exact amount of Professional Tax liability depends on the state regulations, but you generally need to calculate PT based on the number of employees (including directors drawing salaries) and apply the state-specific rates.
For example:
- If the rate is Rs. 2,500 annually per employee (including directors with a salary), and there are three individuals (one employee and two directors with salary), the liability could be Rs. 7,500 annually (Rs. 2,500 x 3).
### 2. **Proportionate Payment for a Newly Established Company**
When a company is established in the middle of a financial year (e.g., August 2009), it generally needs to pay Professional Tax for the full year, as per state regulations. However, some states may allow proportionate payment based on the number of months of operation.
- **Full-Year Liability**: Most states require payment for the full year even if the company starts in the middle of the year.
- **Proportionate Basis**: Check the specific state's Professional Tax Act for any provisions allowing proportionate payment based on the number of months of operation.
### 3. **Payment of Professional Tax for Directors**
Professional Tax is generally deducted based on the salary drawn in a financial year.
- **For New Directors**: If a director is appointed in August and starts drawing a salary from October onwards, Professional Tax should be paid only on the salary received.
For instance:
- **Salary Payment**: If the director starts receiving a salary from October, you need to pay Professional Tax for the period from October to March (for the financial year if applicable) and not for August and September.
### **Summary and Recommendations**
1. **Liability Calculation**: Include all employees and directors drawing salaries. Calculate the PT based on state regulations and the number of such individuals.
2. **Proportionate Payment**: Typically, you need to pay for the full year unless the state provides specific provisions for proportionate payment.
3. **Tax on Salary Drawn**: Pay PT based only on the salary withdrawn. No need to pay for months when the salary was not drawn.
**Example Calculation:**
Assuming the state PT rate is Rs. 2,500 annually:
- For a company with 1 employee and 2 directors drawing a salary, the annual PT would be Rs. 7,500.
- If the company was established in August 2009 and PT needs to be paid for the full year 2009-10, the company would typically pay Rs. 7,500 for the full year unless specified otherwise by the state’s regulations.
Always ensure to verify with local regulations and consult with a tax professional or accountant for specific guidance tailored to your state’s laws and your company's situation.
### 1. **Is a Director Counted as an Employee for Professional Tax?**
Yes, a director can be counted as an employee for the purpose of Professional Tax if they are drawing a salary or remuneration. The exact treatment can vary based on the state’s professional tax regulations, but generally:
- **For Professional Tax Calculation**: Directors who receive a salary or remuneration are often considered employees for the purposes of calculating professional tax.
- **Liability Calculation**: If a company has one employee and two directors who receive a salary, the company typically needs to pay Professional Tax on the total number of employees, including directors drawing salaries. The exact amount of Professional Tax liability depends on the state regulations, but you generally need to calculate PT based on the number of employees (including directors drawing salaries) and apply the state-specific rates.
For example:
- If the rate is Rs. 2,500 annually per employee (including directors with a salary), and there are three individuals (one employee and two directors with salary), the liability could be Rs. 7,500 annually (Rs. 2,500 x 3).
### 2. **Proportionate Payment for a Newly Established Company**
When a company is established in the middle of a financial year (e.g., August 2009), it generally needs to pay Professional Tax for the full year, as per state regulations. However, some states may allow proportionate payment based on the number of months of operation.
- **Full-Year Liability**: Most states require payment for the full year even if the company starts in the middle of the year.
- **Proportionate Basis**: Check the specific state's Professional Tax Act for any provisions allowing proportionate payment based on the number of months of operation.
### 3. **Payment of Professional Tax for Directors**
Professional Tax is generally deducted based on the salary drawn in a financial year.
- **For New Directors**: If a director is appointed in August and starts drawing a salary from October onwards, Professional Tax should be paid only on the salary received.
For instance:
- **Salary Payment**: If the director starts receiving a salary from October, you need to pay Professional Tax for the period from October to March (for the financial year if applicable) and not for August and September.
### **Summary and Recommendations**
1. **Liability Calculation**: Include all employees and directors drawing salaries. Calculate the PT based on state regulations and the number of such individuals.
2. **Proportionate Payment**: Typically, you need to pay for the full year unless the state provides specific provisions for proportionate payment.
3. **Tax on Salary Drawn**: Pay PT based only on the salary withdrawn. No need to pay for months when the salary was not drawn.
**Example Calculation:**
Assuming the state PT rate is Rs. 2,500 annually:
- For a company with 1 employee and 2 directors drawing a salary, the annual PT would be Rs. 7,500.
- If the company was established in August 2009 and PT needs to be paid for the full year 2009-10, the company would typically pay Rs. 7,500 for the full year unless specified otherwise by the state’s regulations.
Always ensure to verify with local regulations and consult with a tax professional or accountant for specific guidance tailored to your state’s laws and your company's situation.
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