Professional Tax is a state-level tax levied on individuals earning an income through employment, business, or profession. In Kerala, this tax is governed by local bodies such as municipalities, municipal corporations, and panchayats. Despite being a relatively straightforward compliance requirement, many employers, professionals, and freelancers in Kerala make avoidable mistakes in professional tax filing and remittance, leading to penalties, notices, and even legal issues.
In this comprehensive blog, we will explore the most common mistakes made in professional tax compliance in Kerala and offer practical guidance on how to avoid them. For smooth and accurate filing, you can also get expert assistance from Our Tax Partner – Professional Tax Filing Services.
1. Not Registering Under Professional Tax
One of the most frequent mistakes made by startups, freelancers, and small business owners in Kerala is failing to register under professional tax at the time of starting operations. Even if you are self-employed or running a home-based business, professional tax registration is mandatory if your income exceeds the prescribed threshold.
How to Avoid: Apply for professional tax registration within 30 days of starting your business or commencing professional work. Ensure that you register both for enrollment (for self-employed individuals) and registration (as an employer, if you have salaried staff).
2. Delays in Monthly or Half-Yearly Payments
Professional tax payments must be made regularly as per the timelines specified by the local authority. Many businesses in Kerala either forget the due dates or make partial payments, which can result in interest and penalties.
How to Avoid: Set reminders for due dates and automate payments where possible. You can also outsource your tax compliance to a professional service provider like Our Tax Partner to avoid missing deadlines.
3. Incorrect Classification of Salary Slabs
Employers often misclassify employees under incorrect salary slabs, either underpaying or overpaying professional tax. This can lead to reconciliation issues and disputes during audits by local authorities.
How to Avoid: Use the official slab rates published by your local body and update your employee records regularly. If there’s any revision in salary, ensure the PT deduction is adjusted accordingly from the next payroll cycle.
4. Failure to Deduct Professional Tax from Employees
In Kerala, it is the employer’s responsibility to deduct professional tax from the salaries of eligible employees and remit the amount to the local body. Many small businesses forget this statutory obligation or postpone deductions, which can result in penalties for both employer and employee.
How to Avoid: Integrate PT deduction into your monthly payroll system. Maintain records of deductions and ensure they are remitted along with your return filing.
5. Non-Filing or Late Filing of Returns
Filing returns is as important as making the payment. In many cases, businesses in Kerala pay professional tax but forget to file the corresponding return, which is a compliance lapse.
How to Avoid: Always file the return after making the payment. Many local bodies offer online portals for return submission. You can also hire tax consultants to manage filings on your behalf.
6. Using Outdated or Incomplete Employee Data
Filing returns with outdated or incomplete employee information is a common issue. Incorrect names, PAN numbers, salary amounts, or even non-updated resignations can cause discrepancies in PT filings.
How to Avoid: Maintain up-to-date employee records. Conduct internal audits of payroll data before every return filing cycle to catch and correct discrepancies early.
7. Ignoring Local Jurisdiction Rules
Different municipalities or panchayats in Kerala may have different slab rates, payment portals, and due dates. Businesses operating in multiple locations sometimes follow a uniform approach and end up violating local rules.
How to Avoid: Familiarize yourself with the specific professional tax regulations of the local authority under which your office or establishment falls. If operating in more than one area, manage each jurisdiction separately.
8. Misunderstanding Exemptions and Thresholds
Some individuals are exempt from paying professional tax, such as senior citizens or those earning below the threshold. However, many employers either deduct tax from exempt employees or fail to claim valid exemptions for their own self-employed status.
How to Avoid: Understand the eligibility and exemptions under Kerala’s professional tax law. Consult experts when in doubt to avoid incorrect deductions or missed exemptions.
9. Not Maintaining Records and Acknowledgments
Businesses often neglect to retain receipts, payment challans, and acknowledgment copies of returns. This becomes problematic during inspections, audits, or when applying for business loans or government schemes.
How to Avoid: Maintain digital and physical records of all payments and returns filed. Keep a record-keeping system in place for at least 6 years, as recommended under Indian tax laws.
10. Not Taking Professional Help When Needed
Many businesses and freelancers in Kerala try to manage professional tax compliance on their own without understanding the nuances involved. This often results in errors, notices, and missed deadlines.
How to Avoid: Outsource your professional tax compliance to experts like Our Tax Partner. We provide end-to-end services, from registration to monthly payments and return filings, ensuring you remain compliant without any stress.
How Our Tax Partner Can Help
Our Tax Partner offers reliable and affordable professional tax compliance solutions for individuals, freelancers, startups, and businesses across Kerala. Our services include:
- Professional Tax registration and enrollment
- Monthly and half-yearly PT payment calculations
- Timely return filing
- Support with PT slab classification and exemption claims
- Representation in case of audit or notice from local bodies
- Ongoing compliance monitoring and renewal alerts
Explore our PT filing services here: www.ourtaxpartner.com/filing-service/professional-tax-filing/
Conclusion
Professional Tax compliance is not just a routine task—it’s a legal requirement that ensures your business operations in Kerala are legitimate and trouble-free. By avoiding common mistakes and seeking expert guidance, you can safeguard your business from fines, scrutiny, and operational disruptions.
If you’re unsure about your obligations or need help navigating local rules, don’t hesitate to connect with Our Tax Partner for professional tax compliance services that keep your business secure and compliant.
