Fixed Monetary Penalty

• Employers who fail to deduct professional tax from employee salaries are liable to pay a fixed penalty.
  
• The amount varies by state and is generally in the range of ₹1,000 to ₹5,000.
  
• The penalty is imposed per instance or per month of non-dedication, depending on local rules.
  
• This penalty applies even if the tax is eventually paid late by the employer.
  
• Continuous non-dedication can lead to cumulative and escalating penalties.
  

Interest on Unpaid Amount

• In addition to the penalty, interest is charged on the unpaid professional tax amount.
  
• Most states charge 1% to 2% per month from the original due date until payment is made.
  
• Interest continues to accumulate until the employer settles the outstanding tax.
  
• This significantly increases the financial burden for delayed compliance.
  
• Interest applies separately for each month of delay and each defaulted employee.
  

Liability to Pay Tax from the Employer’s Pocket

• If the employer fails to deduct tax from salaries, they must bear the tax liability themselves.
  
• This means paying the full professional tax amount due on behalf of all employees.
  
• The employer loses the right to recover it later from the employees.
  
• This is treated as a statutory obligation under the professional tax law.
  
• Such payment does not absolve the employer from penalties or interest.
  

Legal Consequences and Notices

• The professional tax department may issue demand notices or initiate prosecution for default.
  
• Repeated non-compliance can result in legal proceedings under the state’s Professional Tax Act.
  
• In some cases, recovery actions like bank account attachment may be initiated.
  
• Defaulting employers may also face restrictions on obtaining government licenses or approvals.
  
• Legal actions damage the employer’s financial credibility and compliance reputation.
  

Disqualification from Government Contracts

• Employers with pending professional tax liabilities or penalties may be disqualified from public tenders and contracts.
  
• Government bodies often require a professional tax clearance certificate for contract eligibility.
  
• Non-compliant employers are marked on record until dues are cleared.
  
• This impacts the business’s growth and official dealings.
  
• Timely deduction and payment safeguard operational continuity and legal standing.