Profession tax on directors remuneration
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
28 July 2012
Dear Sir,
Ours is an Pvt Ltd Co based in Karnataka.
With recent amendment to IT Act directors remuneration is classified as Profession and TDS u/s 194J is applicable.
Now in this scenario we must book the amount paid to directors as remuneration to Professional Charges.
Now the following situations arise:
1)Whether we should deduct Profession tax under Karnataka Professions Act?
2)Whether service tax is applicable?
Kindly clarify the above.
Thanking You.
Ours is an Pvt Ltd Co based in Karnataka.
With recent amendment to IT Act directors remuneration is classified as Profession and TDS u/s 194J is applicable.
Now in this scenario we must book the amount paid to directors as remuneration to Professional Charges.
Now the following situations arise:
1)Whether we should deduct Profession tax under Karnataka Professions Act?
2)Whether service tax is applicable?
Kindly clarify the above.
Thanking You.
28 July 2012
Mereley because Income Tax has regarded something as other thing can not be extended to other acts. So far as Professional tax is concerned, director's remuneration was taxable under Professional Tax.. in early days as well as at present. Service Tax, the question is doubtful. We need to get clarification from Service Tax Department.
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Querist : Anonymous
Querist :
Anonymous
(Querist)
28 July 2012
Thanks for the clarification.
So we need to deduct profession tax from the remuneration paid to the directors.
Kindly clarify.
So we need to deduct profession tax from the remuneration paid to the directors.
Kindly clarify.
10 August 2024
Yes, in many states in India, including Maharashtra, Professional Tax (PT) applies to the remuneration paid to directors of a company. Here’s a detailed breakdown of the requirements and considerations:
### **Deducting Professional Tax for Directors**
1. **Applicability of Professional Tax:**
- **Directors’ Remuneration:** Professional Tax is applicable on the remuneration paid to directors. This includes both executive and non-executive directors if they are receiving a salary or remuneration for their services.
- **State-Specific Rules:** The rules regarding PT can vary from state to state. You should refer to the specific state legislation or guidelines to confirm the applicability.
2. **Determining the Liability:**
- **Threshold Limits:** Check the professional tax slabs and thresholds specified by the state government. Directors’ salaries are subject to the same PT slabs as employees, but some states may have different rules for directors.
- **Monthly Deduction:** Calculate the PT based on the remuneration paid. PT is typically deducted on a monthly basis from the remuneration paid to the directors.
3. **Payment and Compliance:**
- **Deduction and Payment:** Deduct PT from the director’s remuneration and pay it to the state government within the due dates specified. Use the appropriate payment challan (e.g., MTR-6 in Maharashtra) for depositing the PT.
- **Filing Returns:** Include the PT deducted from directors’ remuneration in the professional tax returns. File the returns periodically (e.g., monthly or quarterly, depending on state requirements).
4. **Filing PT Returns:**
- **Forms:** Use the correct form for filing the PT returns. For Maharashtra, this might be Form 5 for employers. Ensure that the return includes details of PT deductions for all employees and directors.
- **Nil Returns:** If there are no salaries or if no PT was deducted in a particular period, you should file a Nil Return.
5. **Record Keeping:**
- **Documentation:** Maintain proper records of all PT deductions, payments, and returns filed. Keep copies of the PT payment challans and returns for future reference and compliance checks.
6. **Consultation:**
- **Professional Advice:** Consult with a tax professional or accountant familiar with the professional tax laws in your state to ensure full compliance and to clarify any state-specific rules.
### **Example:**
If a director receives a monthly salary of ₹50,000 and the applicable PT slab is ₹200 per month (based on Maharashtra’s slab system), you would:
- **Deduct PT:** Deduct ₹200 from the director’s salary.
- **Pay PT:** Deposit the ₹200 to the PT department using the prescribed challan (e.g., MTR-6).
- **Report in Returns:** Report this deduction in the PT return filed for the respective period.
By adhering to these guidelines, you ensure compliance with state PT laws and avoid potential penalties for non-compliance.
### **Deducting Professional Tax for Directors**
1. **Applicability of Professional Tax:**
- **Directors’ Remuneration:** Professional Tax is applicable on the remuneration paid to directors. This includes both executive and non-executive directors if they are receiving a salary or remuneration for their services.
- **State-Specific Rules:** The rules regarding PT can vary from state to state. You should refer to the specific state legislation or guidelines to confirm the applicability.
2. **Determining the Liability:**
- **Threshold Limits:** Check the professional tax slabs and thresholds specified by the state government. Directors’ salaries are subject to the same PT slabs as employees, but some states may have different rules for directors.
- **Monthly Deduction:** Calculate the PT based on the remuneration paid. PT is typically deducted on a monthly basis from the remuneration paid to the directors.
3. **Payment and Compliance:**
- **Deduction and Payment:** Deduct PT from the director’s remuneration and pay it to the state government within the due dates specified. Use the appropriate payment challan (e.g., MTR-6 in Maharashtra) for depositing the PT.
- **Filing Returns:** Include the PT deducted from directors’ remuneration in the professional tax returns. File the returns periodically (e.g., monthly or quarterly, depending on state requirements).
4. **Filing PT Returns:**
- **Forms:** Use the correct form for filing the PT returns. For Maharashtra, this might be Form 5 for employers. Ensure that the return includes details of PT deductions for all employees and directors.
- **Nil Returns:** If there are no salaries or if no PT was deducted in a particular period, you should file a Nil Return.
5. **Record Keeping:**
- **Documentation:** Maintain proper records of all PT deductions, payments, and returns filed. Keep copies of the PT payment challans and returns for future reference and compliance checks.
6. **Consultation:**
- **Professional Advice:** Consult with a tax professional or accountant familiar with the professional tax laws in your state to ensure full compliance and to clarify any state-specific rules.
### **Example:**
If a director receives a monthly salary of ₹50,000 and the applicable PT slab is ₹200 per month (based on Maharashtra’s slab system), you would:
- **Deduct PT:** Deduct ₹200 from the director’s salary.
- **Pay PT:** Deposit the ₹200 to the PT department using the prescribed challan (e.g., MTR-6).
- **Report in Returns:** Report this deduction in the PT return filed for the respective period.
By adhering to these guidelines, you ensure compliance with state PT laws and avoid potential penalties for non-compliance.
13 August 2024
In the regime of GST, the answer may change.
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