In many states in
entrepreneur can claim the professional tax thus paid as a deduction in the form of business expenses
when calculating his taxable income. But the question on every salaried taxpayer's mind is whether or
not they are allowed to deduct occupational taxes. This article answers his question, so read carefully.
What is
professional tax?
The “Professional Tax” is a tax levied on professions, trades, and employment and is levied on the basis of the income from that profession, trade, or job. The professional tax can be levied even on employees and freelancers who are subject to the minimum level. The Indian Constitution empowers states to collect occupational taxes.
However, not all states currently
impose an occupancy tax. For example, in Rajasthan, no occupational tax is
levied, while the governments of
Feature of this Excel Utility:-
1) This
Excel utility prepares and calculates your income tax as per the New Section
115 BAC (New and Old Tax Regime)
2) This
Excel Utility has an option where you can choose your option as New or Old Tax
Regime
3) This
Excel Utility has a unique Salary Structure for Government and Non-Government
employees Salary Structure.
4) Automated
Income Tax Arrears Relief Calculator U/s 89(1) with Form 10E from the
F.Y.2000-01 to F.Y.2022-23 (Update Version)
5) Automated
Income Tax Revised Form 16 Part A&B for the F.Y.2022-23
6) Automated Income Tax Revised Form 16
Part B for the F.Y.2022-23
What
are the tax rates for professionals?
As discussed above, each state is mandated to frame their own professional tax regulations. Therefore, professional tax rates vary from state to state. Section 276 of the constitution empowers the state government to collect occupational taxes but with a maximum of Rs. 2500 of them have been placed. Therefore, no country can impose an occupational tax higher than Rs. 2500.
Who is
responsible for paying the work tax?
• If you are an employee, your employer is responsible for deducting the occupational tax from your gross wages and paying the occupational tax to the state government.
• In other cases, such as corporations, LLPs, corporations, or even property companies, a person practising a trade or profession is subject to paying professional taxes on the income from that trade/profession.
• Therefore, it means that the owner of the company must obtain a professional tax registration certificate to pay the professional tax in relation to his trade/profession, as well as obtain a professional tax registration certificate to deduct and pay the professional tax in names of your employees.
Who is
responsible for collecting professional taxes?
Each state has a business tax department that is responsible for collecting business taxes and remitting them to the state treasury.
What is the treatment of the occupational tax in the income statement?
• Treatment of the professional tax in the personal income tax return in the case of commercial activity.
Entrepreneurs or professionals (including the self-employed) can claim the professional tax they pay as "business expenses". This claim must be presented in the Profit and Loss Account that they have prepared for the purpose of filing the Corporation Tax return.
• Professional tax treatment in the case of employees
For employees, the employer is responsible for deducting the occupational tax from the employee's gross wages. The detail of the professional tax withholding will be available on Form 16 issued by the employer. Employees can deduct the occupational tax that the employer deducts from her salary when calculating income under the boss's wages. Please note that the discount will only be allowed when the employee has already paid the tax. An occupational tax that is earned but not paid is not allowed as a deduction on your tax return.
