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|
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