April 30, 2024

The term “Income tax” collected by the Income Tax Department of India. Professional tax is similar to income tax, but unlike income tax, it is collected by the state government. Professional tax deducts from the employee’s salary income or applies to the income of professionals and businesses for their trade and profession. Many employees may not be aware of the professional tax registration process, tax rate slab, and who is responsible for deducting the professional tax.   Income tax imposed by the Central Government, professional tax is levied by the government of a state or union territory in India. In the case of salaried and wage earners, the professional tax is liable to be deducted by the Employer from the salary/wages, and the same is to be deposited to the state government. In the case of other classes of individuals, this tax is liable to be paid by the employee himself. The tax calculation and amount collected may vary from one State to another, but it has a maximum limit of Rs. 2500/- per year. Professional tax is deductible from taxable income under section 16(iii) of the Income Tax Act 1961, and tax rates vary in different states of India and follow a slab system. The Commercial Tax Department collects professional tax and reaches the fund of the municipal corporation. However, professional tax is not applied in some states. What are the types of professional tax certificates? Professional Tax Enrollment Certificate (PTEC):It applies to owners of business entities, i.e., public and private companies, sole proprietors, partnership firms, and professionals. Professional Tax Registration Certificate (PTRC):It applies to government/ non-government employers, and they deduct the tax from the employee’s salary and pay it to the government. Who is liable to pay professional taxes? Individuals carrying freelance business without employees must register if the income exceeds the threshold provided by the state’s legislation. Owners of sole proprietorships, corporates, and partnership firms are required to pay tax on their trade and profession if income exceeds the threshold. Employers must register for professional tax registration and obtain the certificate of professional tax registration certificate. An employer is liable to deduct the tax from their employee’s salary and deposit it to the state government, and it is also subject to the monetary threshold. Professional Tax Applicable States across India Applicable States Non-Applicable States Andhra Pradesh Central Assam Andaman and Nicobar Islands Bihar Arunachal Pradesh Gujarat Chandigarh Jharkhand Chhattisgarh Karnataka Dadra and Nagar Haveli Kerala Daman and Diu Madhya Pradesh Delhi Maharashtra Goa Manipur Haryana Meghalaya Himachal Pradesh Mizoram Jammu and Kashmir Nagaland Ladakh Odisha Lakshadweep Pondicherry Rajasthan Punjab Uttar Pradesh Sikkim Uttarakhand Tamil Nadu   Telangana   Tripura   West Bengal   Professional Tax Rate- The maximum amount payable per annum towards professional tax is INR 2,500. The professional tax is usually a slab amount based on the gross income of the professional. It is deducted from his income every month. The Commercial Taxes Department of a state/union territory is the nodal agency that collects professional tax on the basis of predetermined tax slabs which vary for each state and union territory. The tax is calculated on the annual taxable income of the individual; however, it can be paid either annually or monthly. What are the Exemptions in professional tax? Any person having a mental or physical disability Parents of a child with a disability Temporary factory workers State-employed foreign individual Any individual aged 65 years or older Individuals running educational institutions Employees of force (Governed by Army, Air Force, Navy Act) Professional Tax Rates in Different States of India Professional tax slab for few states The professional tax rate on salary in Gujarat Monthly Gross Salary Professional Tax Up to 12000 Nil ₹12000 and above ₹200 Per month The professional tax rate on salary in Andhra Pradesh Monthly Gross Salary Professional Tax Up to ₹ 15000 Nil ₹ 15,001 to ₹ 20,000 ₹ 150 per month ₹ 20,000 and above ₹ 200 per month The professional tax rate on salary in Bihar Annual Salary Professional Tax Up to ₹ 3,00,000 Nil ₹ 3,00,001 to ₹ 5,00,000 ₹ 1000 per month ₹ 5,00,001 to ₹ 10,00,000 ₹ 2000 per month ₹ 10,00,001 and above ₹ 2500 per month The professional tax rate in Karnataka Monthly Gross Salary Professional Tax ₹ 1 to ₹ 9,999 Nil ₹ 10,000 – ₹ 14,999 Nil ₹ 15,000 and above ₹ 200 per month The professional tax rate in Kerala Half year Salary Professional Tax half yearly Up to ₹ 11,999 Nil ₹ 12,000 to ₹ 17,999 ₹ 120 ₹ 18,000 to ₹ 29,999 ₹ 180 ₹ 30,000 to ₹ 44,999 ₹ 300 ₹ 45,000 to ₹ 59,999 ₹ 450 ₹ 60,000 to ₹ 74,999 ₹ 600 ₹ 75,000 to ₹ 99,999 ₹ 750 ₹ 1,00,000 to ₹ 1,24,999 ₹ 1000 ₹ 1,25,000 and above ₹ 1250 Documents required for Professional Tax Registration Certificate of Incorporation / LLP Agreement MOA and AOA PAN Card of Company/LLP/Proprietor/Owner/Director NOC from the landlord, where the business is situated Passport size photos of Proprietor/Owner/Director Address and identity proof of Proprietor/Owner/Director Details of employees and salaries paid Additional registrations and licenses Procedure for Obtaining Professional Tax Registration Certificate The applicant must file the application form and the requisite documents. The applicant needs to submit the Application with the necessary documents to the concerned state government. A copy of the same should also be submitted to the tax department. On receipt of an application, the tax authority shall scrutinize the application to ensure that all the information is correct. Issue of Professional Tax Certificate: The authority will issue the registration certificate after successfully scrutinizing all the documents. Penalties Related To Professional Tax Registration Nature of default Penalty Leviable Not obtaining PT registration Rs.5/- per day Late filing of PT return Rs.1,000/- Late payment of PT dues Interest @1.25% p.m.Penalty @10% FAQs Is professional tax mandatory for sole proprietorship? Employer (Pvt./Public company, sole proprietorship, partnership firm) or any individual carrying on profession/trade or being a freelancer required to pay

The term “real-time gross settlement (RTGS)” refers to a funds transfer system that allows for the instantaneous transfer of money and/or securities. RTGS is the continuous process of settling payments on an individual order basis without netting debits with credits across the books of a central bank. Once completed, real-time gross settlement payments are final and irrevocable. In most countries, the systems are managed and run by their central banks. The RTGS system was first adopted by three central banks in 1985. Today, there are more than 110,000 RTGS-enabled bank branches, making it one of the most popular money transfer methods, owing to its capability of transferring funds on the same day. In today’s world financial landscape, RTGS is critical in facilitating efficient and secure transactions, enabling the smooth and timely flow of capital and supporting the growth of businesses and the economy.   What is RTGS? RTGS stands for Real-Time Gross Settlement. It is one of the types of electronic payment systems that facilitate instant and secure transfer of funds between banks in India. RTGS is generally used for large transfers, such as interbank settlements, government payments, and high-value business transactions. Think of it as an express service for moving money between banks, ensuring swift and reliable transfers. Here’s how RTGS is described: Real-time: Funds are transferred immediately, typically within seconds or minutes. Gross settlement: Each transaction is settled individually and in full, without grouping it with other payments. Central banks or financial authorities are in charge of the management and operation of RTGS systems for seamless and secure transactions. RTGS payments have an extremely high level of security, which makes them resistant to counterparty risks. The SWIFT system is an essential part of modern finance, and it speeds up and secures global funds transfer. Benefits of RTGS (Real Time Gross Settlement) The role of RTGS in reducing the risks in high-value payment settlements between financial institutions is particularly critical. Central banks worldwide increasingly adopt RTGS systems due to their effectiveness in bolstering financial security. Due to the nature of real-time settlement, RTGS minimises the window of opportunity for hackers to obtain critical financial data. RTGS dramatically decreases the level of cybersecurity risks, such as social engineering, phishing and data theft, by minimising the exposure of critical information. By enabling immediate and final settlement of transactions, RTGS systems contribute to overall financial security by reducing the likelihood of successful cyber attacks on sensitive financial information.  Features of RTGS Real-Time Online Fund Transfer: Money can be transferred in real-time from one bank to another via RTGS; thus, the system is referred to as RTGS because it allows for real-time gross settlement from one bank to another. Suited for High-Value Transactions: The RTGS is usually used for a high amount above a certain amount, such as ₹ 2 lakh. It is better to use for a large business sum, property transaction, or a considerable amount transfer. Safe and Secure, with RBI’s Backing: RTGS is safe and secure because the Reserve Bank of India protects it, and there is no possibility of fraud and error.  Quick Settlement: RTGS provides the facility of quick money settlement because the payment is settled within 2 hours, and the payments are reflected quickly on the beneficiaries’ end. Available 24×7: Round-the-clock availability of RTGS is another important feature. You can begin RTGS transfers at any point in time, day or night, as the system is available for use 24/7.  How Does RTGS Works? Step 1: Initiation ProcessThe first step is the initiation process, where the payer (sender) here first initiates an RTGS transaction by providing the necessary details, including the recipient’s (payee’s) bank account number, name, and the amount to be transferred. Then the payer’s bank verifies the availability of funds in their account. Step 2: Verification of Settlement MessageAfter the initiation process, the RTGS system receives the settlement message and verifies the authenticity and accuracy of the information. It performs essential checks such as validating the sender’s account, ensuring compliance with regulatory requirements, and confirming the availability of funds. Step 3: Funds TransferWhen the settlement message is verified, the RTGS system authorises to debit from the sender’s account for the transaction amount and simultaneously credits the recipient’s account with the same amount. This transfer of funds happens instantly. Step 4: ConfirmationAfter the funds are transferred, the RTGS system generates confirmations for both the sender and the recipient. These confirmations usually include transaction details, such as the transaction reference number, timestamp, and the updated account balances of the sender and recipient. What are the uses of RTGS? – Real Estate Transactions: RTGS is often utilised where significant amounts of money are involved, such as in real estate transactions. It ensures swift and secure funds transfer for property purchases, sales, and other related transactions. – High-priority Payments: One of the reasons why RTGS payment is the most reliable in need of the time is because it’s super convenient as it is also meant to use during high-priority situations. This works well when an immediate settlement is required, such as emergency healthcare, salary payments, or disaster relief funds and even when a critical supplier payment is required. – International Transfers: In some cases, RTGS systems can facilitate transfers between banks in different countries. Bilateral or multilateral arrangements between countries enable real-time funds settlement, improving international payments’ efficiency. – Government Transactions: RTGS is often used for various government-related transactions, including payment of taxes, customs duties, subsidies, pensions, and other government-to-individual or government-to-government payments. Different Methods to Initiate RTGS Transactions in India Internet banking: Most banks offer online banking services, and you can log in to your account to initiate an RTGS transfer online. In this case, you select the option, enter the name of the beneficiary, amount, and other required details, and then complete the process. Mobile banking apps: In today’s digital world, you can now use your mobile banking app to initiate RTGS transactions as quickly as ever. These apps have been developed to simplify the process and enable you to make RTGS transfers from your mobile internet or tablet. Bank branch: If you are more of a traditional

A moratorium period is a period during which the borrower is not obligated to make payments. In other words, during a moratorium period, the borrower is permitted to halt their payments. It is commonly incorporated in home loans – called an equated monthly installments holiday – and educational loans. Understanding a Moratorium Period A moratorium period typically commences once a loan is granted. It is primarily extended to give the borrower adequate time to sort out finances and prepare for loan repayment. A moratorium period can also occur during the mid-life of a loan. It would be the case if the lender allows the borrower to stop making payments over a specified period for a specific reason – for example, due to financial hardship. It should be noted that interest on the loan generally accrues over the moratorium period. Is a Moratorium Period Beneficial? The ability to defer payments into the future offers greater financial flexibility. However, it is important to recall that interest generally accrues over the moratorium period, resulting in a higher total loan amount payable. Unless the borrower is under financial distress – i.e., unable to make payments – the financial flexibility of a moratorium period is largely offset by the additional interest charge. Moratorium Period vs. Grace Period A moratorium period is commonly confused with a grace period. It is important to note that a grace period is a set length of time after payment is due,  where a payment can be made without penalty. In other words, a borrower is expected to make a payment over the grace period or face penalization – such as a late fee, credit rating downgrade, etc. On the other hand, over a moratorium period, a borrower is not required to make a payment over the period. In addition to the distinct difference as outlined above, a moratorium period length can range from weeks to months, whereas a grace period length is usually 15 days. FAQs How Long Is a Loan Moratorium Period? The length of a loan moratorium period will vary depending on the individual and is agreed upon between the lender and borrower. A moratorium can be up to a few months to a year. They are generally longer in term. What Is an Example of a Moratorium? An example of a moratorium would be an individual who takes out a loan and has a monthly payment of $300. If the individual can no longer pay this $300 due to financial hardship, they would contact their bank and ask for a moratorium on the loan payments. The bank would agree to a moratorium for six months, in which the individual does not have to make any payments. What Is the Grace Period of a Loan? The grace period of a loan will differ for every loan or credit card. Typically, a grace period will be 15 days, but it can be more or less depending on the lender. 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