Professional Tax Dilemma: Who's Responsible for Deductions, the Contractor or Employer?

When deducting the PT from employees' salary, the client asks for challans if the contractor has not deducted the PT. Who stands responsible: the principal employer or the contractor?

Contractor is responsible for the deduction of PT from his contractual employees. Every month, the principal employer needs to check the challans for the deposit of PT.

This is an interesting question. For example, the contractor is located in Bangalore but deploys his staff to work at the principal employer's location, which is in Chennai. In this case, which state's professional tax is applicable to the contractor's employees – whether it will be that of the State of Karnataka or Tamil Nadu.

B. Saikumar
HR & Labour Relations Consultant
Navi Mumbai

Learned Saikumar,
State where employee is working will levy applicable tax.
PT is a local state tax.
Right to levy this tax is given to states through the Clause (2) of Article 276 of India's constitution.

This is true, but in the event of a credit period being applied for payments, how can a contractor deduct PT if payment is being delayed. On the other hand, payments are not being released due to the absence of PT challan. Is this fair on the part of the Principal employer?

@Learned Bijoy

Very true. Your contract with the principal employer should cover the aspect of the period by which monthly bills are to be cleared. Since PT is not a big amount per person, that much of reserve will be required by all contractors.

Dear Nathrao,

Greetings.

Thank you for your response. Does it mean that the contractor, based in Bangalore, shall deduct PT and remit it to the Chennai Tax authorities since the contract workers are working in Chennai?

B. Saikumar
Navi Mumbai

Contractors based in Chennai will have to deduct Professional Tax (PT) as they are paying workers in Chennai. The PT amount will necessarily be deposited in Chennai itself.

Other knowledgeable members may comment on this aspect.

If the contract is for 312 days and involves supplying unskilled/skilled workers through a contractor, and as per the new wages, all salaries, if paid monthly, exceed the PT slab. However, if we deduct the same and pay, then it falls below the minimum wages after the deduction of EPF/ESIC.

How to Pay Wages as per the Minimum Wages Act

How can we pay wages according to the Minimum Wages Act since these are not my permanent workers? They keep changing as per requirements and are irregular—working 26 days one month and only 10 days the next. Therefore, in some months, their salary does not cover the PT slab. Is it compulsory for the contractor to pay PT for all, as they are casual labor?

Hi, I need a clarification from a learned professional. If a contractor is registered in a state where the Professional Tax (PT) is applicable and recruits a team of people to work in a state where PT is not applicable, then what should be the stand as per the law? If we go by payroll processing, it will consider the PT deduction. If we go by the state where the employee actually works, it is exempted. Can anyone in the group please clarify with a circular?

Professional Tax (PT) Overview

Professional Tax (PT) is a tax levied by the respective state, as pointed out in one of the answers. If the contractor's employees work in a state where PT is not applicable, such employees should be exempted from paying PT.