Professional tax is a state tax levied to recover the investment made by the state in infrastructure that enables you as a self-employed professional to work comfortably. The Constitution of India introduced the professional tax in 1949. The annual rate was last revised in 1988 and is currently at Rs. 2,500 per year. This implies that no state can collect more than Rs. 2,500 per year as professional tax.
Listed below are some essential points that you need to know about professional tax as a self-employed individual.
1. Who is responsible for deducting professional tax?
As a self-employed individual, it is your responsibility to do the following:
- Register yourself as a working professional
- Deduct professional tax based on your income slab and remit the same to the state government
2. When do you need to deduct professional tax?
You need to pay professional tax monthly, based on your gross income; some states allow self-employed individuals to pay the tax annually.
3. Do you need to register to make professional tax payments?
All self-employed individuals earning income by carrying out their practice, including doctors, lawyers, chartered accountants, freelancers, medical professionals, etc., are required to apply for a professional tax registration number.
4. When do you need to start making professional tax payments?
You need to make professional tax payments as soon as you start working. However, you can only begin paying professional tax after you receive your professional tax registration number. So, you should apply for the same at the earliest.
5. Do professional tax rates vary between states?
The rates may vary; however, the maximum amount any state can collect from self-employed individuals as professional tax is Rs. 2,500 annually. Further, some states do not require you to pay professional tax, while others offer rebates on advance professional tax payments based on your future income.
6. Can you make professional tax payments online?
Yes, you can make professional tax payments online. However, you will need to have your professional tax registration number to do so. Once you have it, visit the professional tax or sales tax website of your respective state where you work. If you are making monthly professional tax payments, then e-filing is mandatory.
7. Penalties for non-compliance
Penalties for non-compliance on professional tax payments differ between states. The penalties can range from Rs. 5 per day for delays and go up to Rs. 2,000 for the delay by more than a month.
Professional tax collection is taken seriously by the state governments, and the penalties for non-compliance can be high. While some states do not levy any professional tax, as a self-employed individual, you need to be aware of the rules of the state where you work to carry on operations without hassles.
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