Taxation is an essential part of every individual’s and business’s financial responsibility. In Kerala, two common forms of tax often cause confusion among professionals and salaried employees—Professional Tax and Income Tax. While both are mandatory under Indian law, they serve different purposes, are governed by different authorities, and have separate filing requirements.
This blog aims to clearly outline the key differences between Professional Tax and Income Tax in Kerala, helping individuals, businesses, and freelancers ensure full compliance. If you are uncertain about whether you’re filing both correctly, OurTaxPartner.com can guide you every step of the way.
1. Governing Authority
Professional Tax is governed by the local municipal bodies or panchayats under the authority of the Kerala Municipality Act and Kerala Panchayat Raj Act. Each district or local authority collects this tax and manages compliance.
Income Tax, on the other hand, is a central tax levied by the Government of India through the Income Tax Department and administered under the Income Tax Act, 1961.
2. Applicability
- Professional Tax: Applicable to salaried individuals, professionals, freelancers, traders, and business owners operating in Kerala.
- Income Tax: Applicable to individuals, Hindu Undivided Families (HUFs), firms, LLPs, companies, and other taxable entities across India.
3. Tax Calculation Method
Professional Tax in Kerala is based on a slab system determined by the monthly income of the taxpayer. The maximum tax payable is ₹200 per month or ₹2,400 annually.
Income Tax is calculated using progressive slabs based on annual income. Rates vary from 5% to 30% depending on the income bracket and applicable exemptions or deductions under Sections like 80C, 80D, etc.
4. Deduction at Source
- Professional Tax: Deducted monthly from employees’ salaries by the employer and remitted to the local municipality.
- Income Tax: Deducted by the employer in the form of TDS (Tax Deducted at Source) and remitted to the Income Tax Department. Self-employed individuals must pay advance tax installments.
5. Filing and Compliance
Professional Tax requires employers and professionals to register with the local authority and file returns monthly, quarterly, or annually depending on the local rules. Non-compliance may lead to penalties and legal notices.
Income Tax compliance involves filing annual returns (ITR) before the specified due dates. Salaried individuals typically file ITR-1 or ITR-2, while business owners and freelancers use ITR-3, ITR-4, or ITR-5 depending on the structure.
6. Tax Exemptions
Professional Tax offers minimal exemptions. Some municipalities may provide concessions to women, disabled individuals, and senior citizens, but these are not uniform.
Income Tax offers a wide range of exemptions and deductions including HRA, LTA, 80C (investments), 80D (health insurance), and housing loan interest under Section 24(b).
7. Payment Responsibility
- Professional Tax: The employer is responsible for collecting and paying the tax for salaried employees. Self-employed professionals must pay it directly.
- Income Tax: Individuals, including salaried employees, freelancers, and businesses, are responsible for ensuring that correct taxes are paid either through TDS or advance tax.
8. Penalties for Non-Compliance
Failure to comply with either of the two tax laws can result in significant penalties.
- Professional Tax: Late filing may attract penalties of up to ₹1,000 and interest on unpaid tax. Local authorities may also initiate legal action.
- Income Tax: Penalties include late fees under Section 234F (up to ₹5,000), interest under Sections 234A/B/C, and even prosecution for willful evasion.
Comparison Table: At a Glance
| Criteria | Professional Tax | Income Tax |
|---|---|---|
| Authority | Local Municipality/Panchayat | Central Government |
| Applicability | Salaried, self-employed, professionals | All income-earning entities |
| Max Tax Amount | ₹2,400 per annum | No fixed cap (progressive slabs) |
| Filing Frequency | Monthly/Annually | Annually |
| Penalties | Fine + Interest | Late fees + Interest + Prosecution |
How OurTaxPartner.com Helps
OurTaxPartner.com offers comprehensive tax compliance support for individuals and businesses in Kerala. Our services include:
- Professional Tax Registration and Return Filing
- Income Tax Return Filing (Salaried, Freelancers, and Businesses)
- TDS Management and Compliance
- Digital Signature Certificate (DSC) services for secure filing
Whether you are a salaried employee, independent consultant, or small business owner, we help ensure your tax journey is smooth, accurate, and fully compliant.
Conclusion
While both Professional Tax and Income Tax are mandatory obligations, they differ significantly in scope, administration, calculation, and compliance. Understanding these differences can help you avoid legal issues and manage your tax liability more efficiently. For professional assistance in handling both, consult with OurTaxPartner.com — your trusted tax partner in Kerala.
