Saturday, July 10, 2010

Compliance with Maharashtra Profession Tax

Welcome to Tanali Raman’s new blog space. The audience for this blogs are – 1) Accountants coming back to their domain (like me) 2) Inexperienced accountants who have not experienced compliances of various laws relating to company 3) Any such person who is in search of a practical guide in book market, but not able to locate required book.

Well…I surfed entire Appa Balawant Chauk (Large scale book market in Pune-India) for a practical guide on compliance with various laws relating to operation of a company. But unfortunately most of the books offered basic law/bare act or expert commentary. None of the book had practical checklist type design.
Therefore, dedicating all law compliance illiterate like me, here we go with how to comply with profession tax - a quick checklist overview.

1. Liability of Profession Tax: Both employers as well as all employees employed in the state of Maharashtra are liable to pay profession tax. This blog post specifies compliance in relation to profession tax deducted/to be deducted from employees.

2. Amount: Rs. 2500 p.a. – Rs. 200 to be deducted for 11 months & Rs. 300 for February month.

3. Interest on delay: Employer is liable to pay interest @1.25% per month for the delay in payment of profession tax.

4. Payment: Before end of following month in Form III.

5. Where to pay: You can pay profession tax at nearest nationalized banks by cheque. Bank do not charge any commission/fees for the same even if you do not have any relation with

6. Cheque to be written in favour of – for ex. “State Bank of India – A/c Profession Tax”.

7. Return-cum-Challan: As per Maharashtra Profession Tax, Challan (Form III) used for payment of Profession Tax is itself used as Return. In fact, Form III titles as “Return-Cum-Challan” and has three parts – one for the treasury and second part is for payer. Third part is called as Part 1 A & meant for Profession Tax Officer.

8. Information on Return cum Challan for first & second part: a) Profession Tax Registration Certificate No. b) Period (1 month) c) tax Amount d) Interest amount e) signature of employer

9. Information on Return cum Challan for third part aka Part 1 A requires – a) Number of employees in each category (Salary upto 2500, 3500, 5000, 10,000, above 10K etc.) b) the associated rate of tax per month as per categories of #a. c)Amount of profession tax deducted (a x b). d) Total interest for delays in payment of profession tax. d)name & address of the employer.

10. Single cheque for all 12 months with tax liability & interest is accepted.

11. In case of organization having employees based outside Maharashtra - As per Maharashtra Profession Tax, if salary is paid from Maharashtra, liability of profession tax applicable to all employees. However, there are contrary views/clauses in the law which suggests that only Maharashtra based employees are liable for Profession Tax. In my opinion, one should go for aggressive view- Pay Profession Tax only for Maharashtra based employees.

To sum up –

A. In case not yet registered under Profession Tax Act, 1975, please get in touch with consultants. I consulted Mr. Sunil Shah, Chartered Accountant, Pune – +91 9822192934.

B. Profession Tax to be deducted from salaries of employees every month – Rs. 200 and in February – Rs. 300, if salary (including all allowances) exceeds Rs. 10,000 per month.

C. Payment-cum-Return – To be submitted within 30 days from the end of previous month. Tax Payment Challan (Form III) itself serves as monthly return. No need to visit Sales Tax/Profession Tax Office.

D. Return checks for computation of liability – number of employees (x) rate as per category.

E. Pay tax at any nationalized bank – with cheque drawn in favor of “ ___________(nationalized bank) – A/c Profession Tax.

F. Profession Tax liability is computed according to the respective state’s profession tax rules/law. Maharashtra Profession Tax, 1975 is silent on location of employees.

G. Law is otherwise easy to follow and comply.

 Disclaimer: Blog post written on the basis of actual experience. Content of this blog post should not be read as expert advisory and reader should apply his own judgment in implementing the contents. Writer of the blog shall in no circumstances be held liable for any action taken on the basis of this blog post.