Mr. V.K. Bhandari joined one of the biggest MNCs as an operational leader in 2022. He joined at a medium payscale and saw a deduction in his payslip which said “professional tax”. He wanted to know about the system of Madhya Pradesh professional tax, as there was no such deduction while he was working in a similar company in Chandigarh.
Madhya Pradesh Professional Tax comes under The Madhya Pradesh State Tax on Professions, Trades, Callings and Employment Act, 1995 which is also called the Madhya Pradesh professional tax act. This is a common tax that people who are in any kind of profession, occupation, vocation, and employment, need to pay according to the earnings threshold that is specified by the government. This is also referred to as the Madhya Pradesh Vritti Kar Adhiniyam, 1995 and applies to the entire state of Madhya Pradesh.
In India, the professional tax is deducted in the following states only:
- Assam
- Andhra Pradesh
- Bihar
- Gujarat
- Kerala
- Karnataka
- Madhya Pradesh
- Maharashtra
- Meghalaya
- Orissa
- Tamil Nadu
- Telangana
- Tripura
- West Bengal
- Jharkhand
- Sikkim
- Mizoram
Following are Indian states and UTs where no professional tax is applicable:
- Arunachal Pradesh
- Himachal Pradesh
- Delhi
- Haryana
- Uttar Pradesh
- Uttarakhand
- Andaman and Nicobar Islands
- Daman & Diu
- Dadra and Nagar Haveli
- Lakshadweep
- Jammu & Kashmir
- Punjab
- Rajasthan
- Chandigarh
- Goa
Table of Contents
- About the Madhya Pradesh professional tax
- Things to keep in mind regarding the professional taxes
- Applicability of the Madhya Pradesh Professional Tax
- How does the Madhya Pradesh professional tax work?
- Madhya Pradesh professional tax rates
- How to pay Madhya Pradesh professional taxes?
- When is the deadline for paying Madhya Pradesh professional taxes?
- Who is exempt from paying business taxes in Madhya Pradesh?
- Madhya Pradesh professional tax assessment
- Penalties
- Conclusion
- Key Takeaways
About the Madhya Pradesh professional tax
Professional tax collection methods and rates vary from state to state. This is because this type of tax is (or is not) levied by every state government. The amount of the liability is determined by the taxpayer's salary but does not exceed Rs. 2500 in any given year. It is worth noting that not all states have introduced this type of tax.
Article 276 of the Indian Constitution states that the provisions of this law, occupations, trade, occupations, and labor are taxed and collected. Any person who carries on a trade, or business activity and falls into one of the categories in the second column of the table is subject to government taxes for that person's category.
Under Article 246 of the Indian Constitution, Parliament has the exclusive power to enact laws relating to the Union List, including income tax. The profession tax is a refundable amount under the Income Tax Act of 1961 and may be excluded from taxable income. Important details about the profession tax:
- Tax rates depend on personal income
- The maximum amount of tax that can be charged is 2500 rupees
- This tax is levied in 15 Indian states
- Section 276 (2) authorizes the state government to collect these taxes
- The House of Representatives has the exclusive and ultimate power to change the tax rate under Article 246 of the Constitution
Things to keep in mind regarding the professional taxes
- For employees, the employer agrees to pay the corporate tax withheld by the state government by the financial limits set by state law
- Those who are Self-employed are also required to register and are subject to financial restrictions imposed by some state laws
- Employers who also carry out a commercial or professional activity (company, partnership, sole proprietorship, etc.) pay the professional tax on their trade or profession according to the monetary restrictions established by the individual law of the state
- The employer must register and obtain a professional tax registration certificate and a professional tax registration certificate, pay the professional tax on his occupation/profession, and withhold taxes from his employees
- Additionally, individual registration may be required for each office
Applicability of the Madhya Pradesh Professional Tax
- Any Individual who is salaried or self-employed
- A Hindu Undivided Family (HUF)
- A Company/Firm/Co-operative Society/Association of persons or a body of individuals, whether incorporated or not
How does the Madhya Pradesh professional tax work?
The employer withholds Madhya Pradesh professional tax on employees paid from previous wages, and the withheld amount is deposited with the relevant government department.
In addition, each employer must submit a return for the amount thus deposited. The Madhya Pradesh professional tax return must also include proof of tax payment. If no proof of payment is included, the return will be invalid. Self-employed workers are required to pay the Madhya Pradesh professional tax using this provision.
The Madhya Pradesh professional tax department is responsible for collecting corporate taxes. Employers who receive the state government-designated brand of authority can pay taxes to the Treasury through a Challan.
Once the payment deadline is reached, employers who are working in organizations that employ more than 20 workers can transfer payments within 15 days of the end of the month. Employees that work in organizations with less than 20 employees must pay quarterly.
The Maximum Madhya Pradesh Professional Tax Amount is Rs. 2,500 per year as specified under Section 16 (iii) Of The Income Tax Act which should be deducted from his/her gross salary income.
Madhya Pradesh professional tax rates
The state government uses the total pay scale to determine professional tax liabilities. The tax rates for Madhya Pradesh are:
|
Monthly Salary |
Tax Implications |
|
Below Rs. 18,750 |
No tax levied |
|
Between Rs. 18,750-Rs. 25,000 |
Rs. 125 |
|
Between Rs. 25,000-Rs. 33,333 |
Rs. 167 |
|
Above Rs. 33,333 |
208 |
Profession Tax shall be collected every month.
- For Rs.1,50,001-1,79,000 slab, deduct Rs.125 per month
- For Rs.1,80,000 and above slab, deduct Rs. 208 for eleven months and Rs. 212 for the twelfth month
|
Yearly Salary Range |
PT/Year |
|
Up to Rs.1,50,000 |
0 |
|
Rs.1,50,001 to Rs. 1,79,000 |
Rs.1,500 |
|
Rs. 1,80,000 and above |
Rs.2,500 |
How to pay Madhya Pradesh professional taxes?
As mentioned above, employees earning salaries that fit according to the tax slab prescribed by the MP Government are required to pay the Madhya Pradesh professional taxes. Here the employer is responsible for withholding Madhya Pradesh professional taxes from the salaries or wages of the employees involved and for filing it on their behalf with the state government.
When an employer pays a salary or an individual salary, he must file the Madhya Pradesh professional taxes with or without deductions. On the other hand, self-employed workers in Madhya Pradesh must pay their Madhya Pradesh professional taxes and submit them to the designated municipality for collection. Some other details of the Madhya Pradesh professional taxes are:
|
Act |
The Madhya Pradesh Vritti Kar Adhiniyam, 1995 |
||||||||
|
Rule |
The Madhya Pradesh Vritti Kar Niyam, 1995 |
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|
Applicability |
A person who is in a profession |
||||||||
|
Exemption |
Not Applicable |
||||||||
|
Registration Form |
|||||||||
|
Registration Process |
Online |
||||||||
|
List Of Documents For Registration |
|
||||||||
|
Website |
|||||||||
|
Filing Of Returns |
|||||||||
|
Task |
Last Date Of Filing Returns |
Form |
|||||||
|
Monthly PT Remittance |
Every month on day 10 |
||||||||
|
Quarterly Returns |
Every 3 months starting on day 15 of January |
FORM 7.xlsx |
When is the deadline for paying Madhya Pradesh professional taxes?
After withholding Madhya Pradesh professional taxes from an employee, the employer must file it within 10 days of the end of the withheld month. The date depends on the registration process followed for the professional tax records.
- If you register before the start of a tax year, or before the 31st of August of a tax year, you must pay the Madhya Pradesh professional taxes before the 30th of September of that tax year
- If you register your company after August 31 of the fiscal year, you must pay Madhya Pradesh professional taxes within 30 days of registration
- If the employer (on behalf of the employee) or the self-employed worker does not pay the Madhya Pradesh professional taxes on the date indicated, he must pay a penalty equal to 2% of the total unpaid monthly. The amount of the fine can be up to two-thirds of the total amount of unpaid tax
Who is exempt from paying business taxes in Madhya Pradesh?
Madhya Pradesh exempts some people from paying Madhya Pradesh professional taxes:
- Elderly over 65 years of age
- Parents or guardians of children with disabilities / mentally retarded
- People with 40% of permanent disabilities or blindness
Employees or employers should be familiar with Madhya Pradesh professional taxes rates and tax deadlines so that they can calculate and pay the amount by the specified date.
Madhya Pradesh professional tax assessment
- The amount of tax payable by an individual under this Act is estimated separately each year
- If the tax is postponed by the employer, the same fine is paid for taxes
- If the employer or the person does not follow the conditions of the relationship or if the account and the document are incorrect or unreliable, it can be subject to a penalty
- If the employer or individual fails to file or file a tax return, a professional tax assessment agency can reasonably hear its voice from the employer or individual. It can arrange an assessment, at its discretion
Penalties
In case of failure to pay Madhya Pradesh Professional Tax, the following penalties supersede all obligations that employers and employees must comply with.
- Delayed acquisition of the registration certificate-fine Rs. 5 per day (for employers) and Rs. 2 a day (for unemployed but earning individuals)
- Corporate tax breach - 2% monthly penalty. If you do not pay the same amount, the appraiser will have to pay 10% of the total amount of the tax
- Late filing of returns – Rs. 1,000 fine. This is for delays of up to 1 month. Returns not presented after this period will increase the penalty amount to Rs. 2000
- False or inaccurate information - 3 times the penalty for professional tax burdens
Conclusion
The Madhya Pradesh Professional Tax was founded by the Madhya Pradesh Vritti Kar Adhiniyam, 1995 according to the Notification No. 174 dated 31/03/2012 published in the MP Gazette.
Whether you are self-employed or salaried, you must pay a professional tax if working in Madhya Pradesh. In the event of non-payment, the Madhya Pradesh government can impose a 2% monthly fine. In Madhya Pradesh, professional tax registration can be done online. You can also pay your business taxes online through the online financial portal.
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Key Takeaways
- The Madhya Pradesh Professional Tax is levied by the state government. This tax is provided for by article 276, paragraph 2, of the Indian Constitution
- The Madhya Pradesh Professional Tax is collected to raise money for the welfare of the unemployed. The state should only use this money for employment purposes. The constitution authorized the state to collect the Madhya Pradesh Professional Tax. However, some states do not levy this tax
- Some people are exempt from the Madhya Pradesh Professional Tax
- Employers collect the Madhya Pradesh Professional Tax and if you are self-employed, you must submit your tax once a year
- In some areas, local governments collect business taxes. In these cases, both the employer and the self-employed worker must submit the Madhya Pradesh Professional Tax to the local government
- The employer must file a return on the Madhya Pradesh Professional Tax. However, if you are self-employed, you must also file a business tax return
- The government does not charge income tax on the corporate tax you pay. Therefore, The Madhya Pradesh Professional Tax is withheld from the total salary before the tax is calculated. This tax incentive is granted based on Article 16 of the Income Tax Law
- Income tax brackets are applied once across the country, but in the case of professional taxes, each state has its specialized tax bracket
- Madhya Pradesh professional taxes are calculated based on your annual salary
- If your salary is less than 1.5 lakhs per annum, you don't have to pay anything
- If you earn more than 15,000 a month, i.e., if your annual salary is Rs.1.8 lakhs or more, then according to the Madhya Pradesh Professional Tax, you have to pay INR 212 a month every year
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