Levy of Penalty

• A fixed penalty is imposed for failing to file professional tax returns on time.
  
• The amount varies by state, typically ranging from ₹300 to ₹1,000 per return.
  
• Penalty continues to increase with the duration of the delay.
  
• In some cases, additional daily fines may be levied for prolonged non-compliance.
  
• Penalty is charged even if the tax has already been paid, but the return is not filed.
  

Accrual of Interest on Outstanding Tax

• Interest is charged on the unpaid or unreported professional tax amount.
  
• Most states charge between 1% and 2% interest per month on the due amount.
  
• Interest is calculated from the original due date until the tax is paid.
  
• It applies even if the return is delayed, but tax was deducted.
  
• The longer the delay, the higher the interest burden.
  

Legal Notices and Recovery Proceedings

• Tax authorities may issue notices for default in return filing.
  
• Recovery action can be initiated against employers or self-employed individuals.
  
• Business bank accounts may be frozen until compliance is completed.
  
• Repeated non-filing may lead to prosecution under state laws.
  
• Defaulting entities may be marked for audit or inspection.
  

Suspension or Cancellation of Registration

• Persistent non-filing can result in the suspension of the professional tax registration.
  
• Once suspended, the entity cannot legally deduct or pay professional tax.
  
• Reinstating registration requires full payment of outstanding dues and penalties.
  
• Entities may also be required to submit additional documents during reactivation.
  
• Suspension affects compliance with other government licenses and approvals.
  

Impact on Business and Licensing Activities

• Professional tax returns are often required for trade license renewal.
  
• Government departments may deny permissions or contracts to defaulters.
  
• Non-filing reflects poor compliance and may damage a business’s reputation.
  
• Clearance certificates will not be issued until filings are up to date.
  
• Maintaining consistent return filing helps ensure uninterrupted operations.