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Introduction:

Professional tax is a direct levy imposed by the state government on individuals engaged in various professions, including lawyers, doctors, chartered accountants, etc. This tax is deducted from the gross salary, alongside other deductions such as TDS, EPF, and any additional applicable deductions.

Professional tax, a state-level levy, is imposed by the state government on individuals and professionals exceeding income thresholds, with a maximum charge of ₹2500, governed by Article 276 of the constitution, serving as a crucial revenue source for state development.

Applicability of Professional Tax:

Professional act Tax is levied by many states and union territories in India based on varying income criteria, with most employees of companies required to pay unless exempted by the state government. Exemptions may be provided in certain cases.earnings Professional Tax is applicable on:

• Hindu Undivided Family(HUF)
• Lawyers
• Architects
• Company Secretary
• Chartered Accountant
• Tax Consultants
• Doctors
• Insurance agents
• Companies and business Firms
• legal practitioners
• Contractors
• Small traders, business persons

Difference Between Income Tax  and Professional Tax :

Income Tax	Professional Tax
Income tax is tax  on earnings derived from diverse sources including salary, rent, fees, interest, and more.	Anyone engaging in activities such as trade, employment, or a profession like law or accounting is required to pay tax.
The central government determines income tax rates and slabs annually.	rates and slabs are determined by the state governments.
Income tax slabs and rates remain uniform across India.	slabs and rates vary from state to state

What Makes Professional Tax Different for Different People:

varies among individuals based on their state of residence in India, as different states have distinct tax slabs. These slabs determine the amount of professional act tax imposed on individuals with monthly income sources.

For Salaried Individuals: 

Professional act tax for salaried individuals is determined based on their gross monthly income and the tax slab applicable in the state where they are employed. For instance, in Telangana, if an individual earns ₹25,000 per month, the monthly tax would be ₹200, calculated according to the state’s slab rate. Employers deduct this amount from employees’ salaries.

For Self-employed Individuals:

Self-employed individuals and those employed by organizations are responsible for their own tax payments to the state government. This obligation applies to all professionals, including doctors, lawyers, Company Secretaries, Chartered Accountants, and freelance professionals, if their state imposes. They must visit the state’s website, download the appropriate form, and use their registration number for tax payments. Some states offer rebates on lump sum payments.

For Companies:

When running a business in India, two tax responsibilities must be taken into account.

• Your company is required to pay a lump sum tax based on the deductions from your employees’ earnings.

• As a business owner, you are also responsible for paying tax based on your own income.

Consequences of Non-Payment of Professional Tax:

Each state has its own Tax Act, which specifies the penalty amounts. Upon the applicability of professional Act tax, any violation can result in penalties and accrued interest.

• The penalty for non-payment of the tax is 25%, capped at 50% of the tax due, along with applicable interest.

• Failure to comply with any provision of the Act or rules may result in a fine ranging from ₹500 to ₹5000. Continued offenses may lead to fines ranging from ₹10,000 to ₹50,000 per day until compliance is achieved.

Professional Tax exemption:

Exemption from professional is granted to the following individuals:

• People with disability
• Parents of mentally challenged children.
• Textile industry Workers 
• Senior Citizen

Conclusion: 

Paying professional tax is mandatory for all eligible individuals, making it crucial to understand the applicable tax laws in India. Compliance with professional tax norms requires knowledge of two key aspects: tax slabs and rates in the state of employment, and the payment process. Timely payment and filing of returns are essential to avoid penalties.