Professional tax in Bengaluru: what a new company must do before its first salary

You have set up the company. You have made your first offer letters. Someone on the team asks, "Have we registered for professional tax?" and nobody is sure.

Professional tax is a small state tax, but it has its own registration, monthly payment and penalties. This article walks through what a new company in Karnataka has to do, in the order you will meet it.

Where you stand

Professional tax in Karnataka is a state levy on people who work or do business in the state. The law is the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976. In this article we call it the Karnataka PT Act. The tax is levied "for the benefit of the State" (s.3(1), Karnataka PT Act). Everyone who works in the state in a listed category pays it at the rate set in the Schedule to the Act (s.3(2)).

For a new company, two separate things can apply to you.

1. You deduct tax from your employees' salaries. The Act says tax on a person earning salary or wages must be deducted by the employer before the salary is paid (s.4, Karnataka PT Act). The employer must pay it to the government "irrespective of whether such deduction has been made or not". In plain words: if you forget to deduct, the tax is still yours to pay.

2. The company itself pays a yearly amount. The Schedule lists "Companies registered under the Companies Act, 2013 and engaged in any profession, trade or calling" at ₹2,500 per annum (Schedule, entry 10, Karnataka PT Act, as substituted by the Karnataka Act 14 of 2023). The Act defines "person" to include a company (s.2(h)), so the company is a taxpayer in its own right.

Directors also appear in the Schedule. Entry 4 lists "Directors" at ₹2,500 per annum. A director who draws a monthly salary from the company is also covered as a salaried person. The Commercial Taxes Department's FAQ says that professional tax applies if a director of the company receives salary on a monthly basis.

Two more points. Where a person falls in more than one entry, "tax is payable under any one of such entries" (Explanation I to the Schedule). So an employer covered by entry 6 (Shops and Commercial Establishments Act, 1961 employers with more than five employees, ₹2,500 per annum) does not pay under both entries 6 and 10. And every additional place of a listed person is treated as a separate person, except godowns (Explanation V to the Schedule).

What the monthly deduction is

For salaried employees, the Schedule's entry 1 covers those whose monthly salary or wage is ₹25,000 and above. The Karnataka Act 33 of 2025 changed the rate of this entry from 1 April 2025. It now reads:

• ₹200 per month, except for February.
• ₹300 for the month of February.

(Section 2 and section 1(2), Karnataka Act 33 of 2025.) Eleven months at ₹200 plus ₹300 gives ₹2,500 a year.

The department's printed schedule page may show only ₹200. Do not rely on it. Act 33 of 2025 sets the February figure, and the portal notice says PT for February 2026 is to be deducted at ₹300 per employee instead of ₹200.

Employees earning less than ₹25,000 a month do not fall in entry 1. The department's FAQ lists salaried individuals with a monthly gross income below ₹25,000 as exempt.

What counts as "salary" for this test? The Act defines it broadly. It includes pay, dearness allowance and "all other remunerations received or receivable", including arrears, bonus and perquisites (s.2(j), Karnataka PT Act). Bonus and arrears are spread over the months they relate to (s.2(j), Explanation). Check the monthly figure with these included, not just basic pay.

The deadline clock

Here are the time limits that matter to a new employer.

Registration: 30 days. Section 5(1) says every employer liable to pay tax under section 4 must obtain a certificate of registration from the assessing authority. Section 5(3) sets the time. If the employer was not already engaged in any profession, trade, calling or employment, it must apply "within thirty days from the date of commencement of his profession, trade, calling or employment". The same sub-section says the authority must grant the certificate within thirty days of receiving an application that is in order (s.5(3), Karnataka PT Act).

The safe reading for a new company: count 30 days from the day you start business or start employing people, whichever is earlier.

Monthly payment and statement: 20 days. A registered employer must file, within twenty days after the month ends, a statement of salaries paid and tax deducted for the previous month. The statement must come with proof of payment of the full tax (s.6A(1) and (2), Karnataka PT Act). The department's FAQ puts this as payment "within 20th of succeeding month".

There is a lighter option for very small payrolls. Where the tax deducted in a month is not more than ₹5,000, the employer may file within twenty days after the end of the quarter instead. The quarters end on 31 May, 31 August, 30 November and the end of February (proviso and Explanation to s.6A(1), Karnataka PT Act).

Annual return: 60 days. Every registered employer must file a return within sixty days of the end of the year, showing salaries paid and tax deducted for the preceding year. The year runs from 1 April (s.2(m)). The tax must be paid in advance before the return is filed, and a return without proof of payment "shall not be deemed to have been filed" (s.6(1) and (2), Karnataka PT Act).

The company's own ₹2,500. For a person who is enrolled after the year has started, the tax is due "within one month from the date of enrolment". For one already enrolled before the year starts, it is due before 30 April (s.10(2), Karnataka PT Act). The Act also says a person liable to be enrolled is treated as enrolled for payment purposes even if they did not enrol (proviso to s.10(1)).

Step by step on the portal

The Commercial Taxes Department runs the Professional Tax portal, called e-Prerana. Its FAQ describes the steps.

• Get your PAN or TAN ready. The portal registers employers using the company's PAN or TAN. The FAQ says: "Using PAN or TAN you can register on the e-prerana for employer."
• Choose "New RC Request". RC means registration certificate. Enter the PAN (or TAN) and the name exactly as it appears on the PAN (or TAN) record. The FAQ says the name must match the name displayed on the PAN card.
• Enter the PT office and your mobile number. With a PAN, you also enter the PT office. Then you get an OTP.
• Set a password. After the OTP, the portal asks for a password and shows a message that registration is successful.
• Log in and file the monthly return. Select the month, fill in the return, and pay online.
• Make the e-payment and submit. The FAQ says all e-payment modes are enabled: net banking, debit and credit cards, UPI, and cheques or demand drafts.
• Download the return. After submitting, download or print the return, which the FAQ calls "FORM 5-A".

If the portal says you are already registered, your PAN is already on the system. Use the existing login. A filed return can be revised only after 24 hours from the original submission (FAQ).

Check the portal for the exact fields and documents it asks for on the day you apply. The FAQ is a help page, not the Act.

What not to do

• Do not wait for your first salary run. The 30-day clock in s.5(3) runs from when you start.
• Do not deduct and keep the money. An employer who deducts and then does not pay is treated as an "assessee in default" (s.11(1), Karnataka PT Act).
• Do not give deliberately false details on the application. The penalty can be up to ₹1,000 (s.5(6), Karnataka PT Act).
• Do not assume a small payroll means no registration. The FAQ says even one employee triggers deduction and payment. The company also has its own ₹2,500 under entry 10.

What it costs if you miss it

The Act has several layers, and they stack.

• Interest. An employer who fails to deduct or pay pays simple interest at one and a half per cent of the tax due for each month or part of a month it stays unpaid (s.11(2), Karnataka PT Act, as amended by Karnataka Act 14 of 2023 with effect from 1 April 2023). The same rate applies to a person liable to be enrolled who does not pay (s.11(3)).
• Penalty after a notice of demand. If a registered employer or enrolled person fails to pay within the time or date specified in the notice of demand, the assessing authority may, after giving a reasonable opportunity to be heard, impose a penalty "equal to ten per cent" of the tax due. The older words "without reasonable cause" and "not exceeding fifty percent" were removed with effect from 1 April 2023 (s.12, Karnataka PT Act, as amended by s.6 and s.1(2), Karnataka Act 14 of 2023). The penalty is in addition to the interest under section 11.
• Best-judgement assessment. If an employer has not registered or has not filed a return, or a person has not enrolled, the authority can assess the tax on its best judgement after giving a hearing, and may add a penalty equal to the tax assessed (s.7(3) and (3A), Karnataka PT Act).
• Fines in court. Failure without sufficient cause to comply with the Act or its rules can lead on conviction to a fine of up to ₹5,000, plus up to ₹50 a day if the failure continues (s.23, Karnataka PT Act).
• Company officers. Where a company commits an offence, the people in charge of the business at that time can be treated as guilty along with the company, unless they prove the offence happened without their knowledge or that they took due care (s.24(1), Karnataka PT Act).

A notice can be served by email to the address given at registration (rule 27, Karnataka Tax on Professions, Trades, Callings and Employments Rules, 1976, as substituted in 2025). Use an inbox that someone checks.

What to do now

• Next step: Apply for the employer registration certificate on the Professional Tax portal using the company PAN or TAN (s.5(1), Karnataka PT Act). Confirm with the portal how the company's own ₹2,500 under entry 10 is to be enrolled and paid.
• Deadline: Apply within thirty days of starting business or employment (s.5(3), Karnataka PT Act). File the monthly statement with payment within twenty days after each month ends (s.6A(1), Karnataka PT Act).
• Consequence of missing it: Interest of one and a half per cent a month on the unpaid tax (s.11(2)), a penalty of up to ten per cent of the tax due if a notice of demand is not met (s.12), and possible best-judgement assessment with a further penalty equal to the tax (s.7(3A)).

Have a CA review your facts before you act or file.

Frequently asked questions

1. Is professional tax in Karnataka deducted from every employee?
No. The rate in entry 1 applies to salary or wage earners whose salary for a month is ₹25,000 and above (Schedule, entry 1, Karnataka PT Act). The department's FAQ lists those earning below ₹25,000 a month as exempt.

2. How much do I deduct in February?
₹300 for February and ₹200 for every other month, for an employee in entry 1 (s.2, Karnataka Act 33 of 2025, in force from 1 April 2025).

3. Does a director need to pay professional tax?
Directors are listed in entry 4 of the Schedule at ₹2,500 per annum. The department's FAQ also says professional tax applies if a director gets a monthly salary. Only one entry applies to a person (Explanation I to the Schedule); have your CA confirm which.

4. We have just two employees. Do we still register?
The Act requires every employer liable to pay tax under section 4 to register (s.5(1)). The department's FAQ says an employer with even one employee has to deduct and pay. Separately, the company pays under entry 10 of the Schedule.

5. What if we missed the 30 days?
Apply now, before a notice arrives. Interest runs on unpaid tax (s.11(2)), a ten per cent penalty can follow if a notice of demand is not met in time (s.12), and the authority can assess unregistered employers on its best judgement (s.7(3)).

6. Our payroll is run from another state. Which state gets the tax?
The department's FAQ says professional tax is a state tax and must be deposited in the state where the employees are working, whichever place the salary is paid from.

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See Also

• Hiring your first employees in Visakhapatnam: Andhra Pradesh professional tax for a new company
• Shops and establishments registration for a Bengaluru office
• Hiring your first employees in Hyderabad: Telangana professional tax registration and deduction