1️⃣ Introduction
Professional Tax (PT) is a state-level tax levied under the Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987 (hereinafter referred to as “APPT Act”). It is an important compliance obligation for all businesses, including proprietorships, partnerships, LLPs, and companies operating in the State.
While most businesses are familiar with paying PT for their employees, confusion often arises when it comes to partners in a partnership firm or LLP:
- Should partners register and pay PT separately?
- What if they don’t draw any salary or profit share?
- Can the firm discharge the partners’ PT liability?
This article addresses these questions in depth, providing a practical guide for Chartered Accountants, tax consultants, and businesses.
2️⃣ Legal Framework: Quick Recap
The APPT Act mandates that:
- Every employer must obtain registration to deduct PT from salaries paid to employees and remit it monthly.
- Every person engaged in any profession, trade, calling, or employment with income exceeding the threshold must obtain enrolment and pay PT directly, even if they are not salaried employees.
👉 Key Sections:
- Section 3: Levy of tax on professions, trades, callings, and employments.
- Section 5: Employer’s obligation to deduct and pay PT for employees.
- Schedule: Specifies classes of persons and the rate of tax.
3️⃣ Applicability to Partnership Firms
| Obligation | Entity Responsible | When Applicable |
|---|---|---|
| Employer Registration | The Firm | Always, if employing staff |
| Deduction & Payment for Employees | The Firm | Always, for each salary cycle |
| Enrolment for Partners | Each Partner (individually) | If drawing remuneration/profit share above the threshold |
Thus, the firm and the partners are treated as separate persons under the Act.
4️⃣ How Does It Work for Partners?
📌 Scenario A: Partner Drawing Monthly Remuneration
- If a partner draws a fixed monthly salary, they are considered as deriving income from the profession of partnership.
- If the remuneration exceeds ₹15,000/month → PT payable = ₹2,500/year.
- The firm does not deduct PT on the partner’s salary — each partner must enrol separately and pay directly.
✅ Key Point: Partner’s PT cannot be clubbed with employee PT return.
📌 Scenario B: Partner Only Receives Annual Profit Share
- A partner who receives an annual profit share is still earning income under ‘Profession’.
- If the profit share exceeds ₹1,80,000/year (₹15,000/month average), PT applies.
- Again, the partner must enrol separately.
📌 Scenario C: Partner Does Not Draw Any Remuneration or Profit Share
- Some partners (e.g., dormant, silent or family partners) may not receive any share or salary.
- No income = No profession income = No PT liability.
- Such partners are not required to enrol or pay PT.
This aligns with the principle that PT is income-based.
5️⃣ Practical Examples
| Partner | Income/Remuneration | Enrolment Needed? | PT Payable? |
|---|---|---|---|
| Partner A | ₹25,000/month salary | ✅ Yes | ✅ ₹2,500/year |
| Partner B | ₹2,50,000 annual profit share only | ✅ Yes | ✅ ₹2,500/year |
| Partner C | No salary, no profit share | ❌ No | ❌ No |
6️⃣ Common Compliance Mistakes
✔ Mistake 1: Firm assumes paying PT for employees covers partners too.
Correction: Partners must comply individually.
✔ Mistake 2: Firm deducts PT from partner’s salary.
Correction: Not required — partner pays directly.
✔ Mistake 3: Silent partners with zero income still enrol.
Correction: No need. Enrol only when earning.
7️⃣ Frequently Asked Questions (FAQs)
🔹 Q1: Can the firm pay PT for partners on their behalf?
A: No. The firm cannot discharge the partner’s personal PT liability. Each partner must enrol and remit separately through their own PT Enrolment Certificate (EC).
🔹 Q2: Do non-working partners or minors need to enrol?
A: If they do not receive any income — no enrolment is required.
🔹 Q3: Is PT applicable on capital contribution?
A: No. Capital contribution is not income from profession. Only income like remuneration, commission or profit share triggers PT.
🔹 Q4: What if a partner is also a salaried employee elsewhere?
A: Both incomes are independent for PT purposes:
- Employer deducts PT for the salary.
- Partner must enrol separately for partnership income if applicable.
8️⃣ Recommended Compliance Steps
✅ For the Firm:
- Obtain Registration Certificate (RC) as an employer.
- Deduct PT from salaries of employees (not partners).
- Remit monthly & file returns.
✅ For Partners:
- Each partner drawing income above threshold should:
- Obtain Enrolment Certificate (EC) in own name.
- Pay PT annually before the due date (usually by 30th April).
9️⃣ Penalties for Non-Compliance
- Failure to enrol or pay PT attracts monetary penalties, interest, and possible prosecution under the Act.
- It can affect the firm’s overall compliance rating during state audits.
🔟 Concluding Guidance
Professional Tax for partners is often misunderstood but easy to comply with when the principles are clear:
👉 Income earned = Enrol and pay
👉 No income = No need
Always maintain clear records of profit share/resolutions to demonstrate the basis for no income if applicable.
📌 Draft Clarificatory Note for Partners
To Whom It May Concern
This is to confirm that as per the APPT Act, partners of [Firm Name] who do not receive any remuneration or profit share during the relevant year are not required to enrol or pay Professional Tax individually for that year. This compliance position is taken in good faith and in accordance with statutory provisions.
✔️ Key Takeaways
✅ The firm must discharge its obligations as an employer.
✅ Partners must assess their own income position annually.
✅ Clarify the treatment with a CA to avoid penalties.
📚 References
- AP Tax on Professions, Trades, Callings and Employments Act, 1987
- Official notifications & Schedule
- ICAI practical guide on PT compliance
Stox N Tax 
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