7 points every self-employed individual should know about professional tax
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7 points every self-employed individual should know about professional tax

  • Highlights

  • Professional tax is levied by the state

  • Your employer pays professional tax on your behalf

  • Professional tax is calculated on your gross monthly salary

  • You can check the amount in your salary slip

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 concept of professional tax was introduced in the Constitution of India in 1949. The annual rate was last revised in 1988 andis currently 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 important points that you need to know about Professional Tax as a self-employed individual.

1. Who is responsible to deduct Professional Tax?

As a self-employed individual, it is your responsibility to do the following:
a. Register yourself as a working professional
b. 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 however, 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 who are earning income by carrying out their own practice including doctors, lawyers, chartered accountants, freelancers, medical professionals, etc., are required to apply for a Professional Tax Registration Number.

4. When you need to start making professional tax payments?

You need to start making professional tax payments as soon as you start working. However, you can only start 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 other states offer rebates on advance professional tax payments based on your prospective 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 Numberto do so. Once you have it, visit the Professional Tax or Sales Tax website of your respective state where you work. In case 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 increase to Rs.2,000 for delay in filing professional tax 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 so that you can carry on operations without hassles.

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