Income Tax, GST, Wealth Tax, Property Tax, and the list goes on. You must have heard these terms. It’s a payable amount that is charged on the income or revenue generated by your business by the central and state governments, as per their taxation rules & regulations.
You must have come across these terms, while visiting a cafe, a restaurant, or your family discussing about paying taxes at the end of the financial years. Not only taxes but the taxation rules are considered to be a complicated topic of every financial system. This complexity originates due to the presence of multiple types of taxes with multiple rates and amendments that are made in the taxation rules.
Income tax is the most common tax that makes the news headlines and can be read in the newspapers every now and then. It is a tax imposed by the central government on salaried persons, or, to be more precise, on all people who are employed in the country.
However, 'Professional Tax' is a term that few people are familiar with. But, what is professional tax, what are its requirements, and who is responsible for paying it? Why is there a separate professional tax for West Bengal?
Understanding Professional Tax (PT)
The word 'professional tax' may be one of those terminologies that do not fully reflect the true meaning of the term. According to its name, it is not a tax imposed just on professionals. It's a tax placed on all sorts of professions, trades, and employment, and it's based on the revenue generated by those professions, trades, and jobs. It is imposed on workers, self-employed individuals, freelancers, professionals, and those who earn more than the monetary level.
According to the Constitution of India Article 246, Parliament has the sole authority to establish legislation relating to the Union List, which includes income taxes. Only the Concurrent and State lists provide the state with the authority to enact legislation.
Professional tax, on the other hand, is a type of income tax collected by the state government (not mandatory that all states in the country will levy the professional tax). Regardless of the fact that it is a tax on income, the State Government has the authority to enact professional tax laws under Article 276 of the Indian Constitution, which deals with taxes on professions, trades, callings, and employment.
Professional tax is a recoverable sum for the purposes of the Income Tax Act of 1961 and can be excluded from taxable income.
Important details related to professional tax:
- The tax rates differ based on the individual's income
- The highest tax amount that may be imposed is Rs.2,500
- This tax is imposed in 15 Indian states
- Clause (2) of Article 276 gives the state government the authority to collect these taxes
- The parliament has the exclusive and ultimate authority to amend the tax slab rates under Article 246, according to the Constitution
Who Is In-Charge of Collecting and Paying Professional Tax?
Professional tax is handled by the Commercial Tax Department. It is collected by the individual states' corporate tax departments, and it eventually ends up in the municipal corporation's treasury.
Persons Who Are Accountable For Paying The Professional Taxes:
- When it comes to workers, an employer is responsible for deducting and paying professional tax to the state government, subject to any monetary thresholds set by the state's legislation.
- An individual engaged in a business or profession who is also an employer (corporations, partnership enterprises, sole proprietorships, and so on) is liable to pay professional tax on that business or profession, subject to any financial thresholds specified by the specific State's legislation.
- In this scenario, the employer must register and get both a professional tax certificate of registration and a professional tax enrollment certificate in order to pay professional tax on his trade/profession and deduct the tax from his employees. Furthermore, depending on the regulations in each state, separate registration for each office may be necessary.
- Persons who operate a freelancing business without employing anybody are likewise needed to register, subject to any monetary thresholds imposed by the particular State's legislation.
Ever wondered why does professional tax differ for different people? Check out this section.
Professional Tax Different for Different People - Why?
As professional taxes are charged by the state government, they vary from one state to the next. The professional tax is imposed based on a slab established by each state. Just a few states and union territories in India, however, do not collect a professional tax. It is paid by splitting the yearly professional tax owed into 12 equal monthly installments. February is an outlier since it has a higher tax rate than the other months.
There may be times when different sources of revenue from different sectors are taxed separately. For example, in some states, a person operating a transportation service may be required to pay a professional tax of around Rs. 50 per year for each car he owns. This might be limited to a maximum of Rs. 1,000 every year.
What if someone fails to pay his/ her professional taxes? Are there some penalties for them? Let’s find out.
Consequences of Infringement of Professional Taxes Regulation
While the exact amount of the penalty or penalized interest depends on the legislation of each state, all of these states may levy a penalty for failing to register once professional tax legislation is in effect.
There are also other penalties for failing to make a payment by the due date, as well as for failing to file a return by the due date.
In Maharashtra, late registration has a fine of Rs 5 per day, missed fee carries an interest rate of 1.25% per month, late/non-payment of professional tax carries a penalty of 10% of the tax amount, and late filing of the return carries a penalty of Rs 1000 - Rs 2000.
In the Karnataka state government, late tax payments are subject to a 1.25% monthly interest penalty.
West Bengal, on the other hand, levies a 12% per annum tax.
Exemptions in Professional Tax
Professional Tax is not required for the following individuals:
- Those in charge of educational institutions that provide classes from kindergarten to twelfth standard
- Individuals who are members of the Central Paramilitary Force (CPMF)
- A person who has only one kid and has had his or her uterus removed. The required documentation, on the other hand, must be presented
- Any ex-serviceman who falls under the scope of SI No.1 (Schedule)
- Any impaired individual having a disability of at least 40%. The necessary certificate, however, must be supplied
- Individuals who have the authorization to transport products in a single three-wheeler or taxi
- Individuals who are deaf, stupid, or blind and earn a living
- Members of the Armed Forces who are civilians, both non-combatant and combatants. The Army Act, on the other hand, must control the Armed Forces
- Foreign experts who have worked for the government
- All charitable and nonprofit hospitals that are located in areas below the taluk level
So, this was all about the professional tax in general. As we got to know that several states of India have their own rules & regulations regarding the same, let’s have an overview on professional tax in West Bengal. Keep reading!
Professional Tax & West Bengal
The state government of that specific state levies a professional tax. In West Bengal, professional tax is a tax imposed on the income received by any trade and submitted by the employer. Every year, a tax on professions, trades, callings, and employment must be paid to the state or municipal government in the amount of Rs.2500.
The professional tax is similar to income tax, but it is administered by the state government in West Bengal. The government has been able to generate more funds because of an increase in professional tax of Rs.2500.
Types of Professional Taxpayers in West Bengal
There are basically two types of professional taxpayers in West Bengal, they are:
- Self-employed persons
An employer is a person or official in charge of disbursing pay or wages, and it includes the chief of the office or any organization, as well as the manager or intermediary of the employer. The rates for professional tax are set forth in the Profession Tax Schedule.
A self-employed person is someone who is engaged in any profession, business, calling, or employment in West Bengal, including (i) a Hindu Undivided Family, Enterprise, Company, Corporation, or other Corporate entity, any Community, Club, or Association; and (ii) every branch or office of such firm, company, corporation, or other corporate body, any society, club, or association, so involved, but does not include a person who gets wages on a normal basis on being employed for a period not exceeding three months.
*An employer requires the Certificate of Registration, monthly payment of tax and filing of Annual Return.
* A self-employed person requires the Certificate of Enrollment, annual payment of tax, but NOT the filing of any Return.
How to Apply for Registration/ Enrollment for Professional Tax West Bengal
- An employer must submit a Form I registration application to the Profession Tax Officer who has authority over the employer's place of business.
- Similarly, a self-employed individual who is covered by one or more items in the schedule must apply to the competent Profession Tax Officer for enrollment in Form-II.
- The individual who is entitled to a certificate of enrollment must pay the tax due under the Act on Profession Tax Challan in the Bank and apply for a certificate of enrollment in Form II as described above to the Profession Tax Officer, together with a receipted copy of the challan as proof of tax payment. New enrollment applications can also be submitted through the website.
- Both Form I and Form II applications must be filed within 90 days of the date of liability accrual.
- The Profession Tax Officer will issue a registration certificate or an enrollment certificate in Form IA or IIA, accordingly.
- A government department, on the other hand, is exempt from having to apply for a certificate of registration.
How & When: Paying Professional Tax in West Bengal
Registered employers must file returns with a receipted challan proving tax payment. The return time is quarterly for such employers with an annual tax burden of up to Rs 3,000. Such employers must file quarterly returns within 30 days of the quarter's end and pay tax before doing so.
Other employers with an annual tax liability of more than Rs 3,000 must file quarterly reports within 30 days of the end of each quarter and make monthly tax payments within 21 days of the following month for the first two months of each quarter.
*The tax must be deposited at the designated banks/treasuries. Challans must be printed in quadruplicate, with the Bank/ Treasury returning two receipted copies to the taxpayer and the taxpayer submitting one copy to the Profession Tax Office.
Enrolled people are only needed to pay the tax once every financial year, usually by the 31st of July.
The registered individual must send a copy of the receipted challan proving such payment, together with an appendix in Form IX, to the relevant Profession Tax Office.
Tax Slab Rate in West Bengal for Salaried People
The professional tax for salaried people is given by their employees in West Bengal. Let’s see the slab rate:
Tax Slab Rate in West Bengal for Self-Employed Persons
*For the persons who are also self-employed or involved in the trade have to pay a professional tax of Rs.2,500/annum. This amount is irrespective of the limits of the income or the turnover.
Online Payment Option for Professional Tax West Bengal
Apart from paying taxes in person at the PT office, you can also pay them online at wbcomtax.co.in. Click on the e-payment option offered under the e-services section. There's also a 'GRIPS' option under this, which allows you to make a payment effortlessly and swiftly.
Penalty for Late Professional Tax West Bengal
Following are the reasons that an individual or an organization may be required to pay a penalty in West Bengal:
- Payment of the PT has been delayed.
- Failure to enroll in the PT programme within 90 days after being eligible.
Late payment penalties are assessed at a rate of 1% of the total tax for each month.
Again, this may vary from state to state.
In conclusion, it is always important to pay all taxes, including professional and income taxes, in order to maintain a profitable business or work in a secure environment. The conditions for registration and payment vary by state, so it's important to pay attention to them.
This article has focused on professional tax in the West Bengal state. Also, have tried to cover all the basic information and requirements for an individual. Keep a regular check on the tax system otherwise, the consequences and fines can be harsh for the individual or firm.
- Income Tax is a tax imposed by the central government on all people who are employed, whereas Professional Tax is imposed on all person who generates revenue through trades, jobs, or being employed
- Professional Tax differs from state to state and is handled by the Commercial Tax Department
- There are pre-defined Tax slab rates for people who generate revenue. In case, they fail to pay the tax, they are bound to give penalty fees to the State government
- The Professional Tax in West Bengal is Rs 2500 for everyone that is proved helpful for the government to generate more funds
- The employer and self-employed person are responsible to pay the Professional Tax in West Bengal. For paying the taxes, the employer is required to provide a “Certificate of Registration” and the self-employed person is required to submit the “Certificate of Enrolment”
- You can apply to register/ enrol for your tax payment, either offline or online. You can even pay the tax through online mode