KARNATAKA Profession Tax - Slab change.

This query is : Resolved 

13 September 2008

Bonus/ Incentive is paid to employees on yearly basis in a private company.

Regarding this I would like to know:

1)Due to increase in total remuneration in the month in which bonus/incentive is paid, the Profession Tax rate changes(the employees go to next higher slab).

a)Does one has to pay higher profession tax only during that month?

b)If one takes the stand that bonus/incentive so paid has to be spread over the entire year he/she faces following problem.

Bonus / incentive amount is known only at the end of the year. Due to this if a persons PT slab changes after spreading over the year, does one has to file revised returns for the earlier months during which higher PT was not deducted? and does one also has to pay penalty for short deduction during those months.

2) Should one consider bonus/incentive for profession tax purpose on accrual basis or payment basis.

Kindly quote section/rule wherever possible.

Please answer questionwise.

Thank you.

14 September 2008

1) Yes the definition of salary as defined under the profession tax includes bonus/incentives, slabe rate for profession tax will change accordingly

a) Change in slab rate to be seen for the whole year and not in the month in which bonus / incentive is paid

b) there is no penalty in such a situation. yes it is correct that, bouus / incentives should be spread over a period of 12 months as bonus / incentives is paid based on 12 months permormance.

c) actually payment of profession tax is on accrual basis not on payment basis, as bonus / incentives are not determined in the initial stages it is difficult to determine profession tax therefore levy of penalty does not arises

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