Introduction:
Today, running a successful business in Bangalore calls for adequate skills to balance several statutory obligations, including registration, returns, and filings. These go hand in hand with managing the traditional activities of the business like selling, employing, and serving customers.
There are however, a few statutory obligations that attract the most compliance efforts. Top on this list is the registration process for professional tax and compliance with the provisions of the Karnataka Shops and Establishments Act.
Professional tax is levied by state governments on various professions. The rate of professional tax and the process of its remittance vary from state to state. In Karnataka, it is the duty of the employer to register professional tax with the concerned authority, deduct the tax from the salaries of professionals who fall in the taxable category, and remit the tax to the State Government. The employees of the employer are not liable to pay professional tax if the employer has remitted it to the State Government. Professional tax returns are to be filed on a monthly basis. The Karnataka State Government has developed an online Employer Return Filing System to facilitate employers in filing professional tax returns.
In addition, all shops and commercial establishments in Karnataka are required to obtain a registration under the Karnataka Shops and Establishments Act.
Knowledge of the provisions of the Karnataka Shops and Establishments Act and the professional tax law will help business owners and payroll professionals in Bangalore avoid common mistakes in their transactions.
As per the Karnataka Professional Tax web portal, from 01.04.2023, Salaried class persons whose gross monthly salary does not exceed INR 25,000/- , are exempted from payment of professional tax. It further mentions an online procedure for the employer’s registration using PAN/TAN.
As there is a possibility for changes in the rules and notifications relating to professional tax, it is important for an employer to review the latest notification before preparing pay rolls.
Professional Tax Registration means an employer is required by law to get his/her business registered for Professional Tax.
As per the Professional Tax System of Karnataka, employers can register online and also use the same facility for filing returns, paying taxes, and getting tax receipts.
Therefore, Professional Tax Registration means an employer is required to take several subsequent steps including tax deduction and return filing.
Professional Tax Registration and Professional Tax Enrolment
While an employer is required to get Professional Tax Registration, certain professionals are required to get Professional Tax Enrolment. Whether an individual or professional is required to get Professional Tax Registration or Professional Tax Enrolment, depends on the several other conditions.
Compliance with the Karnataka Shops and Establishments Act
The Karnataka Shops and Commercial Establishments Act, 1961, is an act to regulate the hours of work, employment, and conditions of work in various establishments. The India Code considers this act to be a labor law of Karnataka and states that establishments under this act need to get themselves registered.
The Karnataka Shops and Commercial Establishments Rules, 1963, formulate the procedures for registration and renewal of licenses. These rules state that registrations are issued after the payment of a particular fee and submit certain documents. Further, these registrations need to be renewed from time to time.
These rules are of particular importance to the businesses that are situated in or around Bangalore.
Which Entities are Affected?
The below-mentioned entities are required to comply with the Act and the Rules.
- Business entities that have a dedicated commercial establishment, for example, offices, shops, and other commercial outlets.
- Service Providers and Professional Firms.
- Business entities that have employees on their payroll.
- Business entities that have a branch office in Bangalore.
- Businesses that have a centralized payroll in Bangalore.
- Business entities that are present in more than one state.
- Businesses that have employees working from different locations.
For start-ups and small businesses, it is recommended that they follow the requirements of this Act and the Rules. Early compliance would help these businesses avoid restructuring their payroll and records.
Information and Documents Required
The specific documents required are determined by the nature of registration and business structure.
The information mentioned below is generally required.
a) PAN of the business/employer
b) TAN, where applicable
c) Business Constitution
d) Address proof of establishment
e) Particulars of proprietor/partners/directors
f) Employee/Payroll details
g) Commencement of business
h)Other relevant details of the Business
i) Bank/payment details
j) Registration/Licenses
k) Authorizations
l)Digital/Electronic Access
m) Relevant documents as per the nature of the business and present requirements
Procedure for Compliance
a) Determine Applicability
b) Register as an employer under the Karnataka Professional Tax System (if not registered earlier).
c) Identify employees liable to professional tax and exempted employees.
d) Determine professional tax payable by each employee
e) File the professional tax return for the State of Karnataka through Karnataka Professional Tax Online Portal and make the payment.
f) Retain all documents and evidence relating to registration, professional tax returns, payments, and other relevant records.
Step 7: Review Compliance Regularly
Employeesâ and employeesâ names changes, locations of the businesses, changes in the legal structure of the business, and notifications from the government may affect compliance.
Registration under the Shops and Establishment Act
The process for registration of a shop or establishment includes identifying the status of the establishment under the Act, preparing the required information, application and supporting documents, payment of the required fee and obtaining the registration certificate, and displaying or keeping the registration certificate. The registration authority may also require the registrant to give a declaration regarding the employment of children and/or employers. The registration authority has the discretion to allow the registrant to make changes in the registration particulars and to renew the registration.
Registration under the Karnataka Act enables the registration authority to accept an application for registration of an establishment and issue a registration certificate if the application contains the required information and the authority is satisfied with the correctness of the statements contained in the application.
Rules and procedures are subject to change; to confirm current requirements for registration, businesses should check with the registration authority.
Common Mistakes
Professional tax is a state-level tax and is different from income tax and GST.
Rates for professional tax are subject to change, and the payroll team should verify the current rate for a given period.
Compliance for professional tax is done through the PT portal of Karnataka and should be done on a monthly basis.
Not all employees are liable to pay professional tax. Payroll should know the salary threshold to determine employee exemptions.
- Viewing Registration as the End of the Compliance Process
Statutory registrations are only the first step to compliance. Other obligations may include reporting, renewals, document maintenance and control, payroll, and other procedures.
- Confusing PF, PT, ESI, TDS, GST, etc.
Compliance obligations relating to these laws are separate and distinct from each other in terms of the threshold limits, forms, processes, and responsibilities.
Integrating Professional Tax in Payroll Process
It is advisable that professional tax be integrated in the payroll process and not treated as a separate process to be completed at the end.
A complete payroll process can include
Verification of employee data
Calculation of salary and benefits
Computation of professional tax and TDS
Preparation and remittance of TDS
Processing of PF and ESI
Payslips
Legal compliance
Returns
Reconciliations
Record Retention
Quick Professional Tax Services
A chartered accountant can render a series of services relating to professional tax, including registration, annual returns, and payment.
A CA can also render services relating to
Accounting and Bookkeeping
GST Registration and Returns
Income Tax
Audit
TDS and Other Payroll Compliances
Compliance and Reconciliations
The firm offers complete tax and compliance services to clients in Bangalore.
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The firm has several locations throughout India where it could help business clients with statutory registration, bookkeeping and accounting, tax and GST compliance, payroll compliance, professional and business audit, financial and management consulting, and other services.
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Audits and other compliance services are also available. The firm helps businesses with financial planning, management, and other strategic services.
Pavan Kumar & Co. has locations in many other cities. If users are interested in the services listed above, they can contact the firm for support.
- Is professional tax deducted from all employeesâ salaries?
No. Only employees who earn above a certain amount (determined by Karnataka laws and rules) have professional tax deducted from their salaries. The Karnataka Professional Tax (PT) website states that from 1st April 2023, employees whose monthly gross salary is less than âš25,000 is exempt from payment of professional tax.
- What is meant by PT filing?
PT filing means completing the process of professional tax payment and filing the related returns. The Karnataka Government Portal has a facility for online professional tax return filing for the selected month, payment, and return submission.
- Is it mandatory to register a shop/establishment to carry on business?
It depends upon the nature of business carried on to determine if it is required to be registered under the Karnataka Shops and Establishments Act and Rules.
- Can a CA manage both professional tax and payroll services?
Yes, a CA can manage both professional tax and payroll services, as they are interrelated and interdependent.
Conclusion
The services of a CA can be useful in professional tax registration, return filing and payment, and payroll services. Statutory compliances carried out in an organized manner by a business can provide immense relief to the business and its employees.
If you want to set up a business in Karnataka or expand your business and employ people across India, it would be worthwhile reviewing the professional tax and shops & establishments act compliance services.
Tax laws are constantly changing, and the requirements will vary for each taxpayer. It is the responsibility of the business to understand which requirements are applicable to them for a given period.
Professional Tax Registration, PT Filing, S&E Compliance, Payroll, GST, Accounting, Audit, and other advisory services.