Professional tax is a tax levied on individuals who engage in certain professions, trades, or callings. It is a provincial tax, which means that the rates and rules for professional tax vary from province to province.It is an important source of revenue for provincial governments. It is also a way to ensure that everyone who is able to contribute to the economy is doing so fairly.Tax Consultancy's guide is your trusted companion. Ready to walk this path of understanding and responsibility with us? Let’s begin this journey, hand in hand!
Table Of Content
- What Is Professional Tax & Why Is It Important?
- Who Is Liable To Pay Professional Tax?
- The Process Of Paying Professional Tax
- Procedure of Survey
- Serving of Notices
- Actions Post Non-Payment
- End Note
What Is Professional Tax & Why Is It Important?
Professional Tax is a tax levied on individuals or class of persons engaged in a profession, trade, calling or employment in the Province of Punjab 1.Professional Tax isn't a new kid on the block in Pakistan's financial landscape. But, many are still unaware of its intricacies. So, what exactly is it? Professional Tax is a direct tax imposed on professionals practising in Pakistan.This tax has roots going back several decades. Historically, it served as a primary revenue source for local governments, helping to fund various infrastructural and developmental projects.You might ask, "Why should I be concerned?" Let me tell you:
- Professional tax helps the government to pay for important things like schools, hospitals, and roads.
- It makes sure that everyone who is working hard and earning money is paying their fair share of taxes.
- It encourages people to work in the formal sector, where they have access to important benefits like social security.
Who Is Liable To Pay Professional Tax?
The net of professional tax is wide:
From teachers to bankers, if you're employed, you're on the list.
Architects, consultants, or freelancers – if you're your own boss, you're in the mix too.
Exemptions and Exceptions
Certain professionals, based on specific criteria, might get a tax break or be exempted. Lucky them, right?
The Process Of Paying Professional Tax
Step 1: Initiation
The process kicks off with two distinct pathways:
- Personal Visit: You can take a proactive approach and visit the Excise & Taxation Department personally to sort your tax payment.
- Official Notice: Alternatively, an official might visit various offices in different areas of Islamabad, identifying and notifying tax defaulters.
Step 2: Document Submission
Next, you need to gather and submit a set of crucial documents, showcasing your transparency and readiness to contribute:
- Application: A formal request to the Excise & Taxation Officer (ETO) on your official letterhead.
- Identity Verification: A copy of your CNIC.
- National Tax Number (NTN): Your unique tax identification.
- Proof of Registration: This could be your SECP Registration, registration in the Registrar Office, or any authorized registration document.
- Office Lease Agreement: Documenting your legal occupancy of the office space.
- Salary Sheet: A detailed account of your employees' monthly salaries.
- Tax Returns: Your Income Tax (IT) and Sales Tax (ST) returns for the current or previous year.
- Deposited Fee Challan: Proof of your preliminary fee deposit.
Step 3: Paying the Tax
The amount you owe as professional tax needs to be deposited in the designated accounts of the State Bank of Pakistan (SBP), Islamabad, or the National Bank of Pakistan (NBP), E&TD branch, Islamabad. The account number for this transaction is B01601.
Revised Professional Tax Rates
Here, you will find a comprehensive list of categories along with their corresponding fee amounts per annum in the Islamabad Capital Territory (ICT). This list ranges from companies of varying capital sizes to specific professions like lawyers, doctors, and jewellers, ensuring every professional is accounted for.
Certainly! Below is a table constructed based on the provided professional tax information for different categories:
|S. No.||Categories||Fee Amounts (Rs.)/annum in ICT|
|1.||Companies registered under the Companies Act 2017 having:|
|a.||Capital up to PKR 5 million but not exceeding PKR 10 million||7,000/-|
|b.||Capital exceeding PKR 10 million but not exceeding PKR 50 million||18,000/-|
|c.||Capital exceeding PKR 50 million but not exceeding PKR 100 million||35,000/-|
|d.||Capital exceeding PKR 100 million but not exceeding PKR 200 million||80,000/-|
|e.||Capital exceeding PKR 200 million||90,000/-|
|f.||Employees not exceeding 10||1,000/-|
|g.||Employees exceeding 10 but not exceeding 25||2,000/-|
|h.||Employees exceeding 25||5,000/-|
|3.||Members of Stock Exchanges||5,000/-|
|6.||Motor Car Dealers & Real Estate Agents||10,000/-|
|7.||Health Clubs, Gymnasiums & Others||5,000/-|
|9.||Jewellers, Departmental Stores, Electronics Goods Stores, Cable Operators, Printing Press and Pesticide Dealers||1,000/-|
|10.||Tobacco Vendors – Wholesalers||2,000/-|
|11.||Medical Consultants or Specialists and dental surgeons||5,000/-|
|12.||Registered Medical Practitioners||2,000/-|
This table provides a clear and concise overview of the professional tax rates for different categories in the Islamabad Capital Territory (ICT) for easy reference. Ensure to consult with a tax professional to confirm your exact tax obligations based on your specific circumstances.
Step 4: Receiving the Certificate
Upon completing your payment, you will be issued a Professional Tax Certificate, signed by the concerned official and the Excise and Taxation Officer. This certificate serves as tangible proof of your compliance and commitment to our nation’s growth.
Step 5: Annual Renewal
Every July marks the renewal period for your Professional Tax Certificate. For this, you would need:
- Renewal Application: A formal request on authentic letterhead.
- Copy of Last Paid Certificate: As proof of previous compliance.
- Paid Challan: Documenting the due tax amount for the current year
This meticulous process, while detailed, reflects our collective responsibility towards contributing to Pakistan’s prosperity. Every step, every document, and every rupee paid is a testament to your commitment to the economic wellbeing of our nation. Let’s embrace this duty with pride and play our part in building a brighter future for Pakistan.
Here are some additional tips for paying professional tax in Pakistan:
- File your return on time. The deadline for filing your professional tax return varies from province to province. Check with your provincial tax department to find out the deadline for filing your return.
- Pay your tax on time. The deadline for paying your professional tax also varies from province to province. Check with your provincial tax department to find out the deadline for paying your tax.
- Keep records of your payments. It is important to keep records of your professional tax payments. This will help you to prove that you have paid your taxes if you are ever audited.
Procedure of Survey
The majority of the survey process is traditionally conducted through personal visits to assigned areas by the Inspector. This method, though conventional, is considered highly authentic and reliable. Over recent years, new methodologies have also been adopted, enhancing the survey process. These include utilising resources such as:
- Directory of Industrial Establishments Punjab
- Yellow Pages
- SECP List of registered companies
- List from Chamber of Commerce
- Lists from Educational Departments, etc.
Serving of Notices
Three types of initial notices are generally served to the assessee:
1. First Notice
This notice requires the assessee to provide the following information and documents within a specified period, as mandated under section 3 of the Punjab Finance Act 1977 (amended in 1999 and 2000):
- Date of opening of the office, supported by documentary evidence.
- Photocopy of the incorporation certificate (for incorporated companies).
- Paid-up capital of the company, with documentary evidence (e.g., Form "A" acknowledged by SECP).
- Value of imports/exports during the taxable years, supported by documentary evidence (such as a copy of Income Tax returns for those years).
- Year-wise value of work done, services provided, or goods supplied to various governmental and commercial entities, with appropriate documentary evidence.
- Number of employees.
- First and last income tax returns acknowledged by the Income Tax Department.
- Professional Tax receipts, if any paid in the previous years.
2. Second Notice
This serves as a reminder following the first notice and is sent upon the expiration of the stipulated period.
3. Third Notice
This final notice serves as a reminder of the previous two notices, providing the assessee with a last opportunity to be heard. Special notices may also be served, such as:
- Final Call Notice: The Assessing Authority District Excise & Taxation Officer is given the authority to decide the matter ex parte, imposing maximum taxation with a 100% penalty (Section 4 (2) of Punjab Profession & Trade Tax Rules 1977).
- Demand Notice: Issued to assessees who have already been assessed or decided ex parte, accompanied by the 32-A Challan form. This notice must be served at least 30 days after the previous notice under section 6 of the Punjab Professions & Trade Tax Rules 1977. Failure to act on this notice results in procedures being adopted under the Land Revenue Act, 1967, as stipulated in Section 6 of the Punjab Finance Act 1977.
Actions Post Non-Payment
- Notice before Arrest Warrants or Attachment: As per sections 81/82 of the Punjab Land Revenue Act, 1967.
- Arrest Warrants: Issued under the Punjab Land Revenue Act, 1967.
- Attachment Orders: Executed under the Punjab Land Revenue Act, 1967.
Appeal in Case of Objection
Assessees have the right to appeal within 30 days before the Director Excise & Taxation under section 4 (3) of Punjab Profession & Trade Tax Rules, 1977, if they have any objections about the assessment. The Appellate Authority has the power to order the charge of the whole tax or to authorise a refund.
All assessed units are recorded in the Demand Register, maintaining a record of all paid amounts and arrears under section 11 of the Punjab Professions & Trade Tax Rules, 1977, in Form P.F.T-3.
The fiscal year runs from 1st July to 30th June, as established under section 1 (3) of the Punjab Finance Act, 1977.
Every person liable to pay the tax is required to submit their particulars to the District Excise and Taxation Officer by the 31st day of August each year.
Crediting of Amount
The tax amount should be credited to the nearest treasury using Form P.A.R.T-2, or sent directly to the District Excise and Taxation Officer via postal order or cheque on specific banks.
Deleting of Demand
If any person discontinues their trade, profession, employment, or calling, they must notify the District Excise and Taxation Officer within 30 days under section 10 of the Punjab Professions & Trade Tax Rules, 1977.
Professional tax, like all taxes, can seem daunting. But, it's an essential cog in Pakistan's economic wheel. By understanding and embracing it, we're not just fulfilling a duty but paving the way for a brighter future. Ready to play your part?
What is the main purpose of professional tax?
It serves as a revenue source for local governments to fund developmental projects.
Who determines the tax slab for professionals?
The local tax authorities set the slabs based on income levels.
How often do I need to pay professional tax?
Typically, it’s an annual payment. However, check with local tax guidelines for specifics.
Are there any penalties for delayed payments?
Yes, penalties are imposed for late payments or non-payment of professional tax.
Can I claim a refund if I've overpaid my professional tax?
Generally, overpaid amounts can be adjusted against future payments. However, consult with your tax advisor for clarity.