Interest & Penalty under the Karnataka Professional Tax

Overview : This webpage analyses the Karnataka Professional Tax and its associated interest and penalties for non-compliance. It is a state-imposed financial obligation for those in various professions in Karnataka. The page covers the penalties for non-registration, non-filing of returns, delayed payment, and non-payment of the professional tax. It also provides practical tips for compliance.

Introduction to Karnataka Professional Tax

Karnataka Professional Tax is a mandatory financial obligation imposed by the state on individuals and organisations engaged in various professions, trades, and employment within Karnataka. This tax is an important part of the state’s revenue system. It is essential for all professionals and businesses operating within the state to understand the specifics of this tax, including the potential interest and penalties for non-compliance. On 14 March 2023, the Government of Karnataka notified the Karnataka Tax on Professions, Trades, Callings and Employments (Amendment) Act, 2023 (New Amendment), which amends the Schedule, Interest and penalty levied under the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976 (Karnataka Professional Tax Act). The Governor gave assent to the same on 13 March 2023. This amendment will be effective from 1 April 2023. Following are the penalty and Interest provisions.

1. Penalty for Non-Registration or Non-Enrollment (PTRC/PTEC)

Employers must register for the Professional Tax Remittance Certificate (PTRC) as soon as they become liable to deduct professional tax while paying salaries to their employees. Additionally, any establishment listed in the schedule must enrol within 30 days of its incorporation or business commencement. Failure to comply with this regulation incurs a penalty of ₹1,000. This regulation ensures that all employers are accounted for in the state’s tax system.

2. Penalty for Non-Filing of PTRC/PTEC Return

It is essential to file PTRC or PTEC returns accurately and on time, as non-filing leads to a penalty of ₹250. This measure encourages timely record-keeping among professionals.

3. Interest on Delayed Payment

Delay in the payment of Professional Tax leads to an accumulation of interest. The rate is set at a simple interest of 1.5% of the due amount for each month or part thereof until the tax is paid. This interest rate is a deterrent against delayed payments, ensuring prompt compliance. Please note that the simple interest on arrears in case of default committed in payment of professional tax has been increased from 1.25% to 1.5% of the arrears effective 1st April 2023

4. Penalty for Non-Payment of PTEC/PTRC

The penalty for not paying professional tax has been revised. Starting from April 1, 2023, the penalty will be 10% of the tax amount due. This is a significant decrease from the previous penalty of 50%, which was in effect until March 31, 2023. This change has been implemented to make the penalty more reasonable and encourage compliance.

Consequences of Non-Compliance

Non-compliance with tax regulations can have serious consequences beyond financial penalties. It may lead to legal issues and damage the reputation of a business or individual professional. Therefore, it is crucial to be compliant in a timely manner not only to avoid penalties but also to maintain a positive standing in the professional community. Here are some practical tips to ensure compliance :

Timely Payment
Regular Return Filing
Stay Informed
Contact us for help

Conclusion

It is crucial to comply with the Professional Tax laws of Karnataka to avoid financial penalties and maintain a reputable professional standing. By staying updated with the latest information, following deadlines, and comprehending the intricacies of the tax system, individuals and organizations can ensure that they fulfil their obligations effectively and efficiently.