Many salaried employees are familiar with the term 'Professional tax' or 'P tax' since it appears on their pay slips or Form 16s. Here, we will clear up any confusion about what 'Professional tax' is and why it is deducted, as well as whether only salaried employees must pay it.
What is Professional Tax (P Tax)?
State governments impose professional taxes on all citizens who earn their living through employment. The amount collected varies from state to state, but the maximum is 2500 rupees.
There is a tax imposed not just on professionals. The tax is based on the income of the profession, trade, or employment. Employers, freelancers, professionals, etc. are liable for this tax if their income exceeds a certain threshold.
Professional Tax in India
State governments charge a professional tax in India Under Article 276, Clause 2 of the Indian Constitution, the government of India assigned the task of collecting professional tax to the states in 1949 Professional tax is similar to income tax, with one exception: the state government charges professional tax, whereas the central government charges income tax.
What Causes Professional Taxes to Differ Between States?
Since it is a state-imposed tax, it varies from state to state. It is deducted according to the slabs determined by each state. Some states do not charge professional tax at all. It is usually paid in 12 equal monthly instalments, with February being the largest one.
How are professional taxes collected?
Professional taxes are collected by employers from monthly salaries.
Professional tax must be paid by you if you do not work for anyone else. Otherwise, they can be fined for failing to collect or pay it.
When does Professional Tax (P Tax) apply?
The following entities and individuals are subject to P Tax:
- Companies
- Firms
- Surveyors
- Tax consultants
- Management consultants etc.
Tax rate for professionals
Various states levy professional taxes Each state has its own professional tax laws and regulations, but all use a slab system based on income to assess professional taxes
A further provision of Article 276 of the Constitution allows for a maximum cap on professional tax of Rs 2,500, above which no tax can be levied.
Consequences of Professional Tax Regulation Violations
State laws may vary regarding the amount of the penalty or penal interest, but all states that enact professional tax legislation will impose a penalty for not registering.
In addition, penalties apply if the tax return is not paid or filed by the due date.
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