Understanding Professional Tax in Karnataka: How to Handle Yearly Bonuses and Centralized Payroll?

Dear Respected ones,

Regarding Professional Tax Karnataka Clarification:

1. If we pay a yearly bonus at festival time on a separate statement without including it in the salary statement for that month, is it right or wrong? Will the yearly bonus payment be applicable to Professional Tax (PT)?

2. We have three units in Karnataka, and our payroll processing is centralized. We have a single PT Code for all branches. If we have a single code, do we pay a renewal/loyalty charge in April and have to pay a single charge or three?

Please suggest.

Understanding Professional Tax and Bonus Payments

Profession tax is a tax on revenue and not just a tax on salary alone. Therefore, if your employees receive a yearly bonus, that amount should also be taken into account when determining the profession tax payable. If the system requires payment of profession tax on a half-yearly basis, the bonus amount should be included in the earnings for that particular half-year period to calculate the tax due.

Branch-wise Payment Segregation for Professional Tax

In the case of a centralized pay processing system, it is important to segregate payments branch-wise for professional tax purposes. The tax for employees in each branch should be paid to the respective local self-government entity (corporation, municipality, or panchayat) where the branch is located. Professional tax is considered income for these local self-government bodies, and therefore it cannot be consolidated and paid at a single location, such as where the head office is situated.