Profession Tax (PT) is a tax levied on the employment and Profession by respective State Government in India.
In Karnataka, Profession Tax is levied under the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976. Under the provision of the Act, Profession Tax shall be paid by every person exercising any Profession or calling or is engaged in any trade or holds any appointment, public or private as specified in the Schedule to the Act.
No Professional tax is payable by persons who have attained age of 65 years and no tax is payable for holding any Profession for less than 120 days in that year.
Who must Pay Professional Tax?
Professional Tax is payable by the following ‘PERSONS’ (Individuals and Business Entities) engaged in any Profession, trade, callings or employment in the State of Karnataka:
- Employees with Salary/Wage of Rs.15000 /- or more
B. Employers (Business Organisations)
- Sole Proprietor
- Partnership Firm (Registered / Unregistered)
- Limited Company (Private / Public)
- Limited Liability Partnership
- Corporations and Corporate Bodies
- Hindu Undivided family (HUF)
- Trust / Society / Club / Association.
Every branch of a firm, company, corporation or other corporate body, any society, club or association is treated as separate person for the purpose of tax liability.
Who is liable to pay the Professional Tax?
Tax payable under this Act by the employee shall be deducted by his employer from the salary or wage of the employee before making the payment of salary to employee and such employer shall be liable to pay tax to the Government on behalf of all such employees.
Registrations under Professional Tax Act
Under the Professional Tax Regulations in Karnataka, an employer must obtain TWO registrations depends on the status whether there are people employed by the business or not.
1. Professional Tax Employer Registration - Certificate of Enrollment (EC)
Every business entity in Karnataka shall obtain the Certificate of Enrollment (EC) from the Profession Tax Officer within Thirty days from the date of commencement business. This registration is mandatory for business whether they employ any people in employment or not.
Every registered business with Enrollment Certificate shall pay tax every year before 30th of April at the specified rates. The amount of tax payable by the employer and the date by which the amount to be paid shall be mentioned in every certificate of enrollment. If an employer has fails to obtain the registration or enrollment within the time specified, the assessing authority shall impose a penalty for delay in obtaining the Registration.
If the Business Establishment is registered as Employers of establishments defined under the Karnataka Shops and Commercial Establishments Act, 1961, the tax rate is as follows:
- No employees -- Nil
- Up to 5 employees -- Rs.1000
- 5 to 10 employees -- Rs.1500
- More than 10 employees -- Rs.2500
The rate of Employer Professional Tax for Company, LLP and Partnership is Rs.2500.00 per year.
2. Professional Tax Employee Registration -- Certificate of Registration (RC)
Every employer liable to Professional Tax on behalf of their employees must obtain a Certificate of Registration (RC) with in thirty days of his becoming liable to pay tax (starting employment of people).
Professional Tax Employee Registration is a must for all the employers who employ people with salary or wages of Rs.15000 /- or more. Certificate of Enrollment (EC) is must for obtaining the Certificate of Registration (RC).
Compliance under the Professional Tax Regulations
c Yearly Employer Tax Payment
Every registered business with Enrollment Certificate shall pay tax every year before 30th of April at the specified rates.
(2) Monthly Return and Payment of Tax
Amount of Profession Tax (PT) to be deducted on employees where Salary of employee is Rs.15000 or more is Rs.200 per month.
Every employer those who have obtained the Certificate of Registration shall file a return within twenty days of the expiry of every month showing the salary and wages paid by him and the amount of tax deducted by him in respect of employees during the preceding month.
Payment of Tax shall also be done along with the filing of Return electronically. Non-filing of return or non-payment of tax in time shall attract a penalty of Rs.250.00 (Rupees Two Hundred and Fifty every month).
(3) Yearly Return.
Every employer shall file a yearly return within sixty days of the expiry of the year, showing the salaries and wages paid by him and the amount of tax deducted by him during the preceding year.
Effect of Non-Registration / Non-Filing of Returns / Non-Payment of Tax
If an employer fails to get the Certificate of Enrolment (EC), or to obtain the Certificate of Registration (RC) or fails to file any return in time, the assessing authority under Karnataka Professional Tax Act shall order the amount of tax to be paid by an employer and impose penalty for non-payment tax and non-filing of returns that are due from an employer.
(1) Employer Registration:
If the employer fails to obtain the Certificate of Enrollment in time, the same shall attract a penalty of Rs.1,000/- and the yearly taxes that are pending to be paid from the date of commencement of business also has be paid.
(2) Employee Registration:
If the employer fails to obtain the Certificate of Registration (RC) in time, and fails to deduct and pay the professional Tax on behalf of the employees, the employer shall be liable to pay the Tax that should have been deducted from the employees from the date of start of employment to the date of obtaining the registration with simple interest at 1.25% for each month or part thereof and it will also attract a penalty equal to the amount tax to be paid till the date of payment.
(3) Non-Payment of Tax:
If the employer fails to make the payment of tax in time, the same shall attract simple interest at 1.25% for each month or part thereof. In addition to the interest, the professional Tax Officer may impose an additional amount not exceeding fifty per cent of the amount of tax due a penalty a well.
(4) Non-Filing of Return:
If the employer fails to file, the monthly return with 20th of next month, the time shall attract a penalty of Rs.250.00 every month.
Exemption from Professional Tax Registration in Karnataka
The following class of persons are exempted from payment of Profession Tax.
- All charitable and philanthropic hospitals or nursing homes situated in places below the taluk level in all districts of the State except Bangalore and Bangalore Rural District.
- Directors of Companies registered in Karnataka and nominated by the financing agencies owned or controlled by the State Government or by other statutory bodies.
- Foreign technicians employed in the State provided their appointments are approved by the Government of India for the purpose of exemption from payment of income tax for the said period (exemption is for a period of 2 years from the date of their joining duty).
- Combatant and civilian non-combatant members of the Armed Forces who are governed by the Army Act, the Navy Act and the Air Force Act.
- Salaried or wage earning blind persons.
- Salaried or wage earning deaf and dumb persons
- Holders of permits of single taxi or single three wheeler goods vehicle.
- Institutes teaching Kannada or English Shorthand or Typewriting.
- A Physically handicapped person not less than 40% of permanent disability (subject to production of certificate from the HOD of Government Civil Hospital).
- An ex-serviceman not falling under Sl No.1 of the Schedule.
- A person having single child and who has undergone sterilization operation, subject to production of a certificate from the District Surgeon, Government Civil Hospital, for having undergone such operation.
- Central Para Military Force (CPMF) Personnel.
- Persons running educational institutions in respect of their branches teaching classes up to twelfth standard or pre-University Education.