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July 24, 2020

Now Company will get Professional Tax Number at the time of Incorporation

by Mahesh Mara in Compliance Law

Now Company will get Professional Tax Number at the time of Incorporation

Ordinance to amend Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975 issued by the Maharashtra Finance Department

The Maharashtra Finance Department on July 22, 2020 issued the Maharashtra State Tax on Professions, Trades, Callings and Employments (Amendment) Ordinance, 2020 to further amend Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975. Let us first understand what do you actually mean by profession tax to understand this ordinance better.

What do you mean by Professional Tax?

Profession tax is an indirect tax levied and collected by the state governments in India. A person earning an income from salary or anyone practicing a profession such as chartered accountant, company secretary, lawyer, doctor etc. are required to pay this professional tax. Different states have different rates and methods of collection

What is the rate of Professional Tax?

Professional tax being levied by the State Government is different in different states. Every state has its own laws and regulations to govern professional tax of that particular state. However, all the states follow the slab system based on the income to levy professional tax. Article 276 of the Constitution which empowers the State Government to levy professional tax also has provided for a maximum cap of Rs 2,500 beyond which professional tax cannot be charged on any person.

In Maharashtra, profession tax is governed under the Maharashtra State Tax on Professions, Traders Callings and Employments Act 1975. 

Who is liable to pay Profession Tax in the State of Maharashtra?

Any person who is engaged in any profession, Trade, callings and employment in the State of Maharashtra is liable to pay Profession Tax. A person includes Hindu undivided family, firm, company, corporation or other corporate body, any society, club or association.

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What certificates are required to be obtained under the Maharashtra State Tax on Professions, Traders Callings and Employments Act 1975?

Following two certificates are required to be obtained under this Act:-

  • Profession Tax Enrollment Certificate (PTEC) – This certificate should be obtained by every person except firms and HUF’s engaged actively or otherwise in any profession, trade callings or employment and falling under any of the classes mentioned in the schedule I of the Act
  • Profession Tax Registration Certificate (PTRC) – This certificate should be obtained by every person including firms and HUF, having employees.

How is profession tax charged under the Maharashtra State Tax on Professions, Traders Callings and Employments Act 1975?

Present Slabs Rates of Profession Tax under the Maharashtra State Tax on Professions, Traders Callings and Employments Act 1975 are:-

  • Profession Tax Enrollment Certificate – Rs.2500 every year
  • Profession Tax Registration Certificate:-
  • For Male Employees

Drawing Gross Salary less than Rs.7500/- — NIL

Gross Salary Rs.7501/- to Rs.10,000/- — Rs.175/-

Gross Salary Rs.10,001/- and above — Rs.200/- (Rs.300 in month of February)

  • For Female Employees

Drawing Gross Salary less than Rs.10,000/- — NIL

Gross Salary Rs.10,001/- and above — Rs.200/- (Rs.300 in month of February)

  • A maximum of Rs.2500/- is payable for the entire year and not more.
  • A director, partner who is supposed to take enrollment certificate and pay Rs.2500 is required to pay once only and not separately for each company or firm in which he is a director and / or partner.
  • Similarly, if an employee is paying profession tax in one company he/she is not supposed to pay profession tax if he/she has a separate business or profession.

Maharashtra State Tax on Professions, Trades, Callings and Employments (Amendment) Ordinance, 2020

The ordinance has made the following amendments in the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975:-

  • In Section 5, a new sub-section 3A has been inserted which specifies the guidelines for obtaining registration certificate under this Act
  • According to Section 5(3A), “Notwithstanding anything contained in this section, a company, which has been incorporated under the provisions of the Companies Act, 2013, after the date of commencement of the Maharashtra State Tax on Professions, Trades, Callings and Employments (Amendment) Ordinance, 2020, shall at the time of its incorporation, obtain the certificate of enrolment and certificate of registration under this Act”. 
  • In Section 6(1), a new proviso has been inserted which specifies the details regarding the showcase of filing of tax returns stating that the employer registered under Section 5(3A), after the commencement of his liability to pay tax, furnish to the prescribed authority, a return in such form, for such period and by such dates as may be prescribed.

Ordinance to facilitate Ease of Doing Business

“Ease of Doing Business” forms part of the “Make in India” initiative of the Government of India. India has recorded continuous improvement in its ease of doing business ranking issued by the World Bank on account of steps taken by the government in this regard.

Under the initiative of Ease of Doing Business, the Government of India has directed to the Ministry of Corporate Affairs and State Government, to integrate the registration process under the Profession Tax Act with the incorporation and registration of a company under the provisions of the Companies Act, 2013, so that such a company should automatically be allotted the enrollment certificate and registration certificate under the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975.

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