The Profession Tax Levy

The Act, and its constitutional ceiling

The Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975 (Mah. XVI of 1975). Section 1 gives the short title, extent and commencement; it extends to the whole of the State of Maharashtra. Section 2 carries the definitions.

Section 3, levy and charge of tax:

(1) Subject to the provisions of article 276 of the Constitution of India and of this Act, there shall be levied and collected a tax on professions, trades, callings and employments for the benefit of the State.

Article 276 of the Constitution is the reason this tax exists and the reason it is small. It permits a State to tax professions, trades, callings and employments, and it caps the total payable by one person in one year. Section 3's first proviso reproduces the cap:

Provided that, the tax so payable in respect of any one person shall not exceed two thousand and five hundred rupees in any year

Rs. 2,500 a year is the maximum any one person can pay, whatever his income and however many entries of the Schedule catch him.

Who is liable, and the exclusion nobody expects

Section 3(2):

Every person including limited liability partnership, registered under the Limited Liability Partnership Act, 2008 (6 of 2009) but excluding firms (whether registered under the Indian Partnership Act, 1932 (9 of 1932), or not) and Hindu undivided family engaged actively or otherwise in any profession, trade, calling or employment and falling under one or the other of the classes mentioned in the second column of Schedule I shall be liable to pay to the State Government the tax at the rate mentioned against the classes of such person in the third column of the said Schedule

Read that slowly, because it contains the fact that decides MU's own scope note.

A partnership firm is NOT liable to profession tax in Maharashtra. Firms, registered or not, are excluded in terms.

A Hindu undivided family is NOT liable either.

A limited liability partnership IS liable, inserted by the amendment Act of 2018.

But the partners are liable individually. Schedule I, entry 19(a), charges each partner of a firm, registered or not, Rs. 2,500 per annum, and entry 19(b) charges each partner of a limited liability partnership the same. Entry 20 charges each co-parcener of a Hindu undivided family, not being a minor.

So the firm pays nothing and every partner pays Rs. 2,500. A firm of three partners produces three enrolments and no enrolment of its own. This is the single most examinable fact in Module II and it is the one most often got wrong.

The employer's duty

Section 4, employer's liability to deduct and pay tax on behalf of employees. The tax payable by an employee is to be deducted by his employer from the salary or wage and paid to the Government, and the employer is liable to pay it whether or not he deducts it.