I received notice u/s 27 of the ‘KTPTC & E Act’. What should I do?

Many of you must have received notice u/s 27 of the ‘KTPTC & E Act’ and must be wondering what you must do to resolve it. Some of you also must be wondering if the notice is genuine as it is sent from a ‘gmail.com’ account rather than  a ‘gov.in’ or ‘kar.in’ account. We have complied certain important matters that you can consider at the time of replying to this notice.

What is KTPTC & E Act’?

• KTPTC & E Act stands for Karnataka Tax for Professions, Trades, Callings and Employment Act 1976. This is a State Act and was promulgated to levy a tax on profession and employment carried out in Karnataka. Most of you would be familiar with this Act as it is responsible for the deduction of Rs. 200 from monthly salaries paid out to employees. While the Act extends to professions and other trades as well, we will limit our discussions to the tax on employment.
• The current rate of professional tax is as follows
  • where the gross salary for the month is less than Rs. 15,000 – NIL
  • where the gross salary for the month is Rs. 15,000 or more – Rs. 200 per month.
• Tax so collected has to be deposited with the government by 20th of the subsequent month. The payment is made online through the e-payment website.
• Once the payment is made, a statement in Form 5-A has to be filed showing  the salary and wages paid to the employees and the amount of tax deducted thereon. This again has to be filed by 20th of the subsequent month.
• In addition, the professional tax license will have to be renewed once each year by 30th April.

What is Sec. 27 and what is this notice all about?

• Sec. 27 of the Act vests with the Professional Tax Officer (PT officer) the same power that is vested in court under the Code of Civil Procedure, 1908. This allows the PT officer to call for such information or such attendance as he deems necessary to verify compliance with the Act.
• The notice being sent out to Employers has been drafted as follows

“Please take notice that you are deducting and paying profession tax in respect of **** number of employees only. Therefore you are hereby called upon to furnish salary register and/or wages register of all the persons (whether or not liable to pay profession tax) working in your establishment in the following format for the months of December 2017 and July 2018 and the financial statements for the year 2016-17 for the purpose of ascertaining the number of employees who are exigible to tax under KTPTC&E Act 1976″

• Thus, the employer is called upon to furnish the salary register month wise,
  • Name of the employee
  • Designation of the employee and
  • Gross salary paid to the employee
• If the company is incorporated in FY 2017-18, you may mention that the financial statements for FY 2016-17 are not available.
• Please ensure that you provide details of only employees who are on your payroll. Please do not include vendors or professionals who provide services to you. Inclusion of these parties on the statement could lead to a levy of PT on these payments as well.

Please draft a formal reply and submit the same to the relevant PT office from where you have received the notice. An in-person visit would be helpful to address any additional questions the officer may have.

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In case of any questions, please do not hesitate to reach out to us on pavan@bclindia.in or vighnesh@bclindia.in or write to us on bclindia.in/contact/. We would be glad to be of your assistance.