Professional tax in Pakistan is a provincial tax levied on persons carrying on a profession, trade, calling, or employment, in addition to income tax, and is collected by the province not by FBR. It is applicable on doctors, lawyers, consultants, and small trade businesses.
Professional Tax Overview
As per the Professional Tax Acts of the relevant provinces (Sindh, Punjab, KP, Balochistan), professionals, traders, and specific categories of employees are liable to pay a certain percentage of tax on an annual basis on the profession, trade, calling, or employment that they are engaged in. It is a provincial tax and hence, the schedule varies from province to province.
Who is Eligible to Pay or File Professional Tax?
Doctors, lawyers, accountants, architects, consultants, shopkeepers, etc., who are engaged in a profession or trade business are required to file professional tax. In some cases, salaried employees above a certain threshold are also required to pay professional tax, wherein the employer deducts professional tax and deposits the amount with the relevant authority.
How is the Applicable Rate of Tax Calculated?
Each province’s Professional Tax Act contains a schedule that specifies the classes of persons, professions, trades, and categories of business along with the corresponding amount of tax applicable. Unlike income tax, it is not calculated as a percentage of income; rather, it is a fixed tax for a given profession/trade/employment category. In some cases, it may depend on the business’s registered capital or turnover bracket.
How to Pay Professional Tax?
Payment of professional tax is usually required to be made to the relevant provincial excise and taxation department as a part of the renewal of your trade license or as a separate challan for annual payment. The employer deducts the amount from the salary in case of salaried employees and deposits the same with the concerned authority.
Common Errors Related to the Collection of Professional Tax
Most commonly, professional taxpayers assume that filing of income tax return with FBR covers their obligation in relation to professional tax as well, which is incorrect. Professional tax is a separate tax that is levied by the province and is filed separately with the excise and taxation department of the province. Filing income tax return with FBR has no impact on your filings and payments due with the excise and taxation department of your province.
If you are trying to understand your overall tax filer status, you may check out our how to become a tax filer guide. To check out your professional tax schedule, you may visit your relevant provincial excise and taxation department’s website.
