A professional tax is a direct tax that the government imposes on professionals and employees. The state governments receive funding from the Professional Tax, which is used to implement plans for the welfare and development of the area. Employers must deduct professional taxes from their employees without fail.
The professional Tax applies to employers of all industries. Not only this, but it is also applicable to professionals like doctors, CAs, traders, and other self-employed people. Besides that, the professional Tax is also applicable to “Persons,” and the definition of a legal person broadly fits groups and organizations like- corporates, companies, branches of companies, cooperative societies, clubs and associations, and HUF (Hindu undivided families).
There are specific individuals or groups of people who can leverage the tax exemptions under the rules of professional Tax. The following are the conditions of tax exemptions:
- Parent of a child with a permanent disability or mental disability
- Members of forces as per the definition in the Army Act of 1950, the Navy act of 1957, and the Air Force Act of 1950, including the members of auxiliary forces.
- The alternate (badli) workers
- Individuals suffering from permanent disability
- Women earning a living under Mahila Pradhan Kshetriya Yojna
- Individuals above the age of 65
All the above-enlisted criteria are a broad list of exemptions. You can go through the state exemption clauses to know the exact exemption applicable. Even people who do not fall under the exemption law criteria can choose not to pay the professional Tax. The condition for the same is their income falls below a certain threshold.
The employers shoulder the responsibility of registration, deduction, and payment of the professional Tax to the government if the employees are regular. Failing to comply with the same, employers might face penalties and fines.
However, self-employed individuals are solely responsible for their payment of professional Tax. They will need to enroll and obtain a certification for enrollment from the income tax department.
Failing to comply, you might face hazardous consequences and many legal hustles. Here is a glimpse of the hazardous consequences individuals or companies might face if they fail to comply with the rules in certain scenarios.
- Failure of registration: The individual or the company might be liable to a heavy penalty for the given period of registration failure.
- Late deposition or failure of deposition: The company will be subjected to a penalty for the given duration
- Non-deposition amount: The IT officials are empowered to recover the due amount and interest from the individuals’ assets. In several cases, the defaulters are prosecuted, and a bank account can also be attached.