Professional tax in tally|how to account

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Sometimes back, I have written  about journal entries for payroll processing for an easy understanding of payroll today i will explain you to understand professional tax and how to account the same in books of account.

Professional tax is a tax on employment or on business. To collect revenue from the public government impose various kind of taxes on citizens like excise duty, vat,CST,income tax, TDS and in the same way, professional tax is such a source of income for government. Professional tax is levied by state in which your business is situated and registered under that state’s vat act.As a businessman or an accountant you must be familiar with applicable business laws and act like provident fund, professional fund. Any breach on account of commercial law may put your business in trouble. A proper accounting of taxation is of the same important as timely deduction and deposition of such taxes.

every business unit is required to pay professional tax on its business as well as for employees serving under it. for rates and duration of professional tax user must check it with their own state vat act. Here I will give you scope and applicability of professional tax pertaining to Gujarat state

A business should have two different registration number under the professional tax i.e. one for itself and one for payment of salary to its employee

Every business registered under Gujarat vat  Act, is required to pay a sum of Rs. 2500.00 per annum on before 30th September of each year towards professional tax.

Every business unit is also required to deduct and pay to the Gujarat state government professional tax on all of its employees as per below table

Salary Per month Professional in Rs.
Up to Rs. 3000 Nil
3000 to 5999 20
6000 to 9999 80
9000 to 11999 150
12000 to 200

for calculation of professional salary, one must calculate actual earnings of an employee/worker and not the gross salary/wages.

Suppose an employees salary is Rs.5000 per month however due to high absent during March, 2010, if company pays him only a salary of Rs.2800 or below Rs.3000, then professional salary will not be deducted from his account.

A company is required to deduct professional tax as mentioned in the above table below disbursement of salary and should deposit the same to the government treasury account before 7th of each month for which payroll is being disbursed.

Finally, an employee can’t get refund of this tax it should be considered like a donation or charity to the government. Of course  state government may empower certain exemption from payment of this tax.

The manual entry of professional tax is just simple

let’s assume an employee is entitled for the salary of Rs. 6500

Dr. staff salary            6500

Cr. salary payable account   6420

cr. Professional tax    (under group of duties and taxes)   80

(being salary calculated for the month of ….)

on payment of professional tax by way of a challan

Dr. professional tax

cr. bank account

(being payment of professional tax for the month of …..)

I will write about how to set up professional tax master ledger in tally.erp 9

  • sushil sakpal

    My salary is Rs.4500 P.M So i need to give professional tax or tds (Please explain me about that)

    • http://www.tallynine.com Mahendra

      Sushil,
      TDS will not be applicable in your case.
      Applicability of professional tax depends on the location(State) of your job because each States have its own different rules.
      For e.g. if you are doing job in Gujarat then Rs. 20 will be deducted from your salary.
      So, only your employer company can tell you more clearly in this regard.
      In Future, please post your query on support forum

      • khimani

        Dear brother,
        Are you from which city? And are u working in Nagar palika? Can u send me reply on my mail id ?

  • imran

    I am 11 month contractual employee under National Rural Health Mission(NRHM) in Gujarat. As I am on cotract basic, Should I pay professional Tax?

    Please solve my query.

    Thanks in advance.

    – Imran

    • http://www.tallynine.com Mahendra

      Hello Imran,
      an employee is not responsible to pay Professional Tax. deduction of professional tax from the salary payable to employee is responsibility of your employer.
      and I believe that professional tax imposed on the payment of salary and not on the type of permanent or contractual job.
      If your salary increase the minimum monthly rates in gujarat than definitely your employer is liable to deduct professional tax

  • Stanly

    Hi,
    I am working in a private company at Pune.the company doesn’t deduct neither PT nor TDS from my salary.Infact company doesn’t keep any salary account to its employees.They have transfered the offered salary amount to my persomnal bank account.Is this mean the company doesn’t function as per law? As well is there any negative impact on my career if I continue here.

    Look forward for your kind advice.

    Thanks,
    Stanly

    • http://www.tallynine.com Mahendra

      Hello Stanly,
      PF and PT are applicable as per laws. Its not compulsory. There are certain requires and both have different requirements and different laws.
      For e.g. if your company having minimum 20 employees then pf is compulsory .
      I don’t think it may affect your career in any way because an employee have absolutely no control over management functionality.
      on The same way, TDS is deducted only if your salary exceed the exception limit. and even if they don’t deduct, you have nothing to worry because your company will be in default and they have to face a heavy penalty and interest for so non deducted Salary.

      on the same way, if they are not deducting PT, its not your fault. its your gain!

      • S. Gupta

        Hi Mahendra,
        I am woring for a MNC and would like to know the following:

        For Maharashtra, Gujarat and M.P.,
        whether professional tax is to be deducted from employees of a subsidiary when they only have 4 to 5 employees in a State. Could you also tell me whether :

        (a) there is a threshold limit for number of employees i.e. an organization must have more than “x” number of employees for it to start deducting professional tax? If yes, what is that limit?

        (b) If the company is to deduct professional tax then what are the other compliances like Shops and Establishment Act License, Trade License, etc. that needs to be complied with to get the professional tax registration?

        • http://www.tallynine.com Mahendra

          Hello S. Gupta,
          There is no such threshold limit on number of employees. Professional Tax is applicable to a company as soon as it is Registered with VAT. The limit is based on Earnings of employees and again every state have their own Rules-threshold limits because this is a State level believable tax so, it differs from state to State.
          For registration if your unit is withing the city limit, you have to contact to Municipal corporation and if it is out of City limit e.g. rural area then the registration will be done at Gram Panchayat.Getting registration is not so hard, just some documents related to your company, Directors ID proof, VAT regn, PAN number etc are enough to get registration for Professional Tax.

  • Rakesh Mittal

    Hi,

    Please suggest us in below mentioned case study –

    1. Org have VAT registration in Delhi.
    2. Org have VAT registration in Haryana.
    3. Employee payroll location in Delhi.
    4. But Employee job location in haryana.

    Now please suggest us whether PT will be applicable for Haryana or Delhi.

    Regards
    Rakesh Mittal

  • rahul

    i want to now about debit entry for rent and after given to rent what are effect goes to please assess me

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