Profession tax liability

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 February 2010 Hi,

We have hired employees on contratual basis.In this case i would like to know deduction of Profession tax is our liability or liability of contractor?

Querist : Anonymous

Querist : Anonymous (Querist)

26 February 2010 h

CA. O.P. Agarwalla

CA. O.P. Agarwalla (Expert)
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18 April 2010 If you are paying them the works contract fee, no professional tax is liable to deducted.

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Querist : Anonymous

Querist : Anonymous (Querist)

20 April 2010 There is no work contract fee?whose liability would be in this case?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 The liability for Profession Tax in the context of contractual employees can be a bit nuanced, and it often depends on the specific circumstances and the terms of the contract. Here's a general guideline:

### **Liability for Profession Tax for Contractual Employees:**

1. **Definition of Contractual Employees:**
- **Contractual Employees** are those who work under a contract, typically through a contractor or a staffing agency, rather than being direct employees of the company.

2. **Liability for Profession Tax:**
- **If Contractual Employees are Considered as Employees:**
- If the contractual employees are considered as employees of your company for the purpose of Profession Tax, then the responsibility to deduct and pay the Profession Tax usually falls on the principal employer (i.e., your company). This is often the case when the contractual employees work under the direct supervision and control of your company.

- **If Contractual Employees are Considered as Employees of the Contractor:**
- If the contractual employees are legally considered employees of the contractor, then the contractor is responsible for deducting and paying the Profession Tax. This might be outlined in the terms of the contract or work arrangement between your company and the contractor.

### **Key Considerations:**

- **Contract Terms:** Review the contract with the contractor to understand the terms related to taxes and compliance. Contracts often specify who is responsible for various statutory obligations, including Profession Tax.

- **Nature of Work:** The nature of the work and control exercised by your company can affect the determination of responsibility. If your company exercises significant control over the work done by these employees, it might be seen as the principal employer for tax purposes.

- **State Regulations:** Profession Tax regulations can vary by state. Check the specific regulations in your state to determine the responsibilities related to contractual employees.

### **Procedure and Documentation:**

1. **Verify Contract Terms:**
- Review the contractual agreement to check if there is a clause that specifies responsibility for statutory taxes, including Profession Tax.

2. **Consult Local Regulations:**
- Check the regulations of the state where the business operates to understand the obligations related to Profession Tax for contractual employees.

3. **Seek Professional Advice:**
- Consult a tax advisor or legal professional to get a clear understanding of your liability and ensure compliance with state-specific requirements.

### **Summary:**

- If the contractual employees are considered as employees of your company, then you would generally be responsible for deducting and paying Profession Tax.
- If the employees are considered as employees of the contractor, then the contractor would be responsible.
- Always review contract terms and consult with a tax advisor to ensure compliance with local regulations.

This approach ensures that you correctly handle Profession Tax obligations and avoid potential penalties or disputes.