Professional Tax

Professional Tax is a tax which is levied at the state level in our country. People who practice a profession of a Chartered Accountant, Cost Accountant, Lawyer, Company Secretary, Doctor or are a Businessperson/Merchant and earn through such professions are liable to pay professional tax in some states of the country. Out of the 29 states and 7 union territories, some of the states which currently impose professional tax in India are Karnataka, Tamil Nadu, Bihar, Andhra Pradesh, Maharashtra, Assam, Kerala, Telangana, Gujarat, Meghalaya, Odisha, Madhya Pradesh, West Bengal, Tripura and Sikkim. As aforementioned, businesspersons, individual workers and merchants come under this tax is ambit. Professional tax is levied by the Municipal Corporation/ authority of any state and union territory. It is levied through predetermined tax slabs and is paid on monthly basis. It is payable by private company employees or may also be payable by people who earn salary in general.Article 276 of the Indian Constitution describes that the Professional Tax shall be imposed as a tax on professions, trades, callings and employments. It also remarks that each individual who is engaged in any profession/trade/calling/employment and lying under one or the other classes mentioned in the article is schedule shall be a party to this tax and shall be liable to pay the tax to the State government at a preannounced rate mentioned in the article is schedule.

Professional Tax Amount

Professional Tax has a slab based structure and it is dependent on the gross income of the professional or the salaried employee who is paying said tax. It is deducted monthly from each individual employee's salary. If the professional in question is a director or a partner of a company, then the said tax is deducted after the gross turnover of the company has been calculated and the said employee's annual earning is clear. However, in states such as West Bengal the payment of professional tax is not dependent on the employee's company's turnover.



SIMPLICITY IN TAX PAYMENT

  • Currently, a startup spends a lot of time and energy to manage the various taxes at various points. It has to deal with VAT, Excise Duty, Service Tax, Octroi, Entry Tax etc. After GST, only one unified tax rate will be applicable. This brings in a major advantage to startup businesses by simplifying the process of tax payment.


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EXEMPTIONS TO NEW BUSINESS

  • Earlier, any business that dealt with goods liable to pay VAT was required to get registration under the VAT act if the turnover crossed Rs. 5 Lakhs. As per the new GST, the limit shall be Rs. 10 lakhs which is a very good thing for startups. Also, businesses with turnover between Rs 10 and 50 lakh are expected to be taxed at a lower rate.

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IMPLEMENTATION OF BUSINESS

  • Any new business needs to have a VAT registration from sales tax department. A business may have to follow unnecessary cumbersome process of registration which may be different in different States. GST will bring about uniformity in process of registration and will only require a centralized registration that will make starting business much simpler.
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SIMPLICITY IN TAX CALCULATION

  • There are many businesses that require the payment of not only Service Tax but also VAT. This makes the calculation for tax very complex. By implementation of GST, only one tax will be required to be calculated and paid. This will make the tax calculation easier.




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