PROFESSIONAL TAX IN INDIA: AN OVERVIEW
Professional Tax is a state-level tax that is levied on the income earned by individuals engaged in professions, trades or employments. The tax is also applicable to individuals who carry out any trade, profession or calling within the state. The tax is collected by the state government and the rates may vary from state to state. Professional Tax is levied on a slab basis, which means that the tax rate increases with an increase in the income of the individual. It is an important source of revenue for the state governments and failure to pay the tax can attract penalties and fines. Therefore, it is important for individuals engaged in professions, trades or employments to comply with the provisions of the law and pay the tax on time.
Professional Tax is governed by the respective State Governments in India. It is an important source of revenue for the states as it is levied on individuals engaged in professions, trades or employments. The tax is levied on a slab basis, and the rates may vary from state to state. The tax is collected by the state government and failure to pay the tax can attract penalties and fines. It is, therefore, important for individuals engaged in professions, trades or employments to understand the applicability and rates of Professional Tax in their state of residence or work. Complying with the provisions of the law and paying the tax on time is essential to avoid any legal consequences.
APPLICABILITY OF PROFESSIONAL TAX
Professional Tax is applicable to all individuals who are engaged in a profession, trade, or employment in a particular state. The tax is applicable to both salaried and self-employed individuals. The tax is levied on a slab basis, which means that the tax rate increases with an increase in the income of the individual.
1. Applicable to Individuals: Professional Tax is applicable to individuals who are engaged in a profession, trade, or employment in a particular state. The tax is applicable to both salaried and self-employed individuals.
2. Applicable to Companies: Professional Tax is also applicable to companies who have employees working within the state. The company is required to deduct the tax from the salaries of their employees and pay it to the state government.
3. Exemption for Low-Income Earners: Some states provide an exemption from Professional Tax for individuals who earn a low income. The exemption limit varies from state to state and is usually based on the monthly income of the individual.
4. Payment by Individuals: The tax is required to be paid by individuals on a monthly or yearly basis, depending on the state's regulations. The tax can be paid online or offline, depending on the state's provisions.
5. Payment by Companies: Companies are required to deduct the tax from the salaries of their employees and pay it to the state government on a monthly basis.
6. Registration: Individuals and companies are required to register for Professional Tax with the state government. The registration process may vary from state to state and is usually done online.
7. Penalties for Non-Compliance: Failure to comply with the provisions of Professional Tax can attract penalties and fines. Non-payment or late payment of the tax can result in penalties, which may increase over time.
RATES OF PROFESSIONAL TAX
The rates of Professional Tax in India vary from state to state and are based on the income slab of the individual or company. Some states have a flat rate of tax, while others have a progressive tax system where the tax rate increases with an increase in income.
A. In Tamil Nadu, the rates of Professional Tax are as follows:
I. Up to Rs. 21,000: No tax
II. Rs. 21,001 to Rs. 30,000: Rs. 136 per month
III. Rs. 30,001 to Rs. 45,000: Rs. 234 per month
IV. Rs. 45,001 to Rs. 60,000: Rs. 390 per month
V. Rs. 60,001 to Rs. 75,000: Rs. 562 per month
VI. Rs. 75,001 and above: Rs. 821 per month
For companies, the rates of Professional Tax in Tamil Nadu are as follows:
I. Less than 10 employees: Rs. 2,500 per year
II. 10 to 19 employees: Rs. 4,500 per year
III. 20 or more employees: Rs. 7,500 per year
Now let's look at a relevant case law related to Professional Tax in Tamil Nadu:
1. In the case, Bharti Airtel Limited vs The Joint Commissioner of Commercial Taxes (2017) 2 MLJ 520, the Madras High Court held that the liability to pay Professional Tax on salary arises at the place where the employee is working and not where the salary is paid. The court held that the employee's salary cannot be taxed twice, and the state where the employee is working has the right to levy Professional Tax. The court also held that the state where the salary is paid can claim a credit for the tax paid by the employee in the state where he or she is working.
2. Tamil Nadu State Transport Corporation (Madurai) Ltd vs The Deputy Commissioner of Commercial Taxes (2009) 19 VST 308. In this case, the Madras High Court held that Professional Tax is a tax on the income earned by an individual or company engaged in a profession, trade or employment. The court held that the tax is not a tax on the services provided by the state, and hence it cannot be treated as a fee. The court also held that the tax is not discriminatory as it is applicable to all individuals and companies engaged in a profession, trade or employment in the state. Citation:
3. State of Tamil Nadu vs TVL. Madras Club Ltd. (2013) In this case, the Madras High Court held that the Professional Tax imposed by the Tamil Nadu government on clubs was unconstitutional. The court held that the tax was discriminatory and arbitrary as it was applicable only to clubs and not to other organizations. The court also held that the tax was in violation of the right to equality and the right to carry on business guaranteed under the Constitution of India. The court struck down the provision imposing Professional Tax on clubs and directed the state government to refund the tax collected from the clubs.
B. In Maharashtra, the rates of Professional Tax for individuals are as follows:
I. Up to Rs. 7,500: No tax
II. Rs. 7,501 to Rs. 10,000: Rs. 175 per month
III. Rs. 10,001 to Rs. 15,000: Rs. 285 per month
IV. Rs. 15,001 and above: Rs. 2,500 per year
For companies, the rates of Professional Tax in Maharashtra are as follows:
I. Less than 10 employees: Rs. 2,500 per year
II. 10 or more employees: Rs. 7,500 per year
Relating Case Laws:
In the case of Bharat Bijlee Ltd. v. State of Maharashtra, the Bombay High Court held that Professional Tax is a tax on the income of the individuals engaged in a profession, trade or calling. It is not a tax on the profession itself. The court observed that Professional Tax is a tax on the privilege of carrying on a profession, trade or calling within the state. The court also held that the tax can be levied only by the state government and not by any local authority.
C. In Gujarat, the rates of Professional Tax for individuals are as follows:
III. Up to Rs. 5,999: No tax
IV. Rs. 6,000 to Rs. 8,999: Rs. 80 per month
V. Rs. 9,000 to Rs. 11,999: Rs. 150 per month
VI. Rs. 12,000 and above: Rs. 200 per month
For companies, the rates of Professional Tax in Gujarat are as follows:
I. Less than 5 employees: No tax
II. 5 to 9 employees: Rs. 2,500 per year
III. 10 to 19 employees: Rs. 6,000 per year
IV. 20 or more employees: Rs. 12,000 per year
Some relevant case laws related to Professional Tax:
1. Godavari Sugar Mills Ltd. vs State of Maharashtra (1975) In this case, the Supreme Court held that Professional Tax is a tax on an individual's income, and hence it cannot be treated as a fee for services rendered by the state. The court also held that the tax is not discriminatory as it is applicable to all individuals and companies engaged in a profession, trade or employment.
2. Deputy Commissioner of Commercial Taxes vs Madras Institute of Development Studies (1986) In this case, the Madras High Court held that Professional Tax is a tax on the income earned by individuals or companies engaged in a profession, trade or employment. The court also held that the tax is not unconstitutional as it does not violate the fundamental rights of individuals or companies.
CONCLUSION
In conclusion, Professional Tax rates in Tamil Nadu are determined by the income slab of the individual or company, and the rates for individuals and companies are different. However, certain organizations or entities may not be subject to the tax, as demonstrated in the case of TVL Madras Club Ltd. where the imposition of Professional Tax on clubs was deemed unconstitutional.
It is important to note that Professional Tax rates vary across states in India, and the tax is applicable to individuals and companies engaged in a profession, trade, or employment within a state. The constitutionality of the tax has been upheld in relevant case laws as it is considered a tax on income earned by individuals or companies.
Professional Tax is a mandatory tax that needs to be paid on a monthly or yearly basis, depending on the state's regulations. Non-compliance with the provisions of the tax can attract penalties and fines. Thus, it is essential for individuals and companies to be aware of their liability and comply with the regulations to avoid legal consequences.
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