24 Important FAQ on Punjab State Development Tax Act 2018

24 FAQ on Punjab State Development Tax Act 2018

By CA. Keshav R Garg, +91-98880-90008

1.      Who is required to pay Punjab State Development Tax?

The Tax is applicable on the person situated in the state of Punjab. The term person as per section 2(j) of the Act covers “person who is engaged in any profession, trade, calling or employment in the State of Punjab and includes a sole proprietor, a partnership firm, a Hindu Undivided Family, a Company, a Society, a Trust, a Club, an Institution, an Association, a local Authority, a Department of any State Government, Union Territory Government or Central Government, a Government enterprise, a statutory body or other body corporate, irrespective of the fact that the main place of business of such person is outside the State of Punjab and where the main place of business of any such person is not in the State of Punjab, the local manager or agent of such person in the State of Punjab in respect of such business.

2.      What are the obligations of the employers situated in the state of Punjab?

Every employer who is operating in the state of Punjab is required to deduct tax from the employees whose Income Exceeds basic exemption limit under Income Tax Act. Where the employee is employed with multiple employers, a declaration may be obtained from the employee and in such case the employee shall be liable to pay tax to the Government. It is not important that the employer has principal place of business in Punjab or not, if he has operations/branch etc in Punjab it shall be liable to deduct tax under the law.

3.      What is the frequency of tax deduction by the employers?

The tax shall be deducted by the employer on quarterly basis and deposited within the next month ending the quarter in which the tax is deducted.

4.      I am a consultant in Punjab, whether I am required to register under Punjab State Development Tax?

Yes, even if you are not a professional like Chartered Accountant etc. since being a consultant your income is chargeable under the head “Income from Business and Profession” you shall be required to take registration. Where your income form parts of the “Income from Other Sources” under Income Tax Act, no registration would be required under PSDT.

5.      Where to register and how to register?

A person can register on www.psdt.punjab.gov.in. A detailed manual is available at the portal for step by step instruction for registration at the portal.

6.      What is the rate of tax and how to derive at the tax payable?

The rate of tax payable under PSDT is Rs. 200 per month. The person whose income exceeds the minimum exemption limit chargeable under Income Tax Act would be required to pay the tax.

7.      What are the returns to be filed by the registered person

In case of Employers and other persons the returns shall be filed on annual basis. The forms for Employers and other category of taxpayers is PSDT-3 and PSDT – 6 respectively. The return shall be filed before the 30^th April of end of the financial year. For Instance for FY 2018-19, the time limit for filing of return is 30^th April 2019.

8.      I have committed a mistake in my return, can I file revised return?

Yes, you can revise the return within 3 months from end of financial year or the notice of assessment whichever is earlier. Therefore where the return is filed on 30^th April 2019, it can be revised up to 30^th June 2019. Where the return is filed on 10^th April 2019, it can be revised up to 30^th June 2019. 

9.      What is the time period for getting registered under the act?

Within 60 days of the commencement of the act, where the person is already engaged in any profession or is an employer and in case new profession is started after the date of enactment, within 30 days of commencement of such new profession/business.

10.  What are the penalties for non-registration under the act?

If the person required to take registration fails to take registration under the act, a penalty of Rs. 50 per day for the period of default shall be charged upon the person.

11.  I am a senior citizens am I required to take registration?

No, The Act does not apply on the senior citizens. Definition of Senior citizen shall remain same as in the Income Tax Act.

12.  We are an organisation having head office outside Punjab, but also has branch in Punjab, Is Branch also required to take registration.

Yes, irrespective of whether the principal place of business of employer is outside Punjab and it has branch in Punjab, for the employees working in branch situated in Punjab shall be subject to PSDT. But in case where the salary is disbursed from the head office or any other officer situated other than Punjab, it shall not be covered under the term “employer”.

13.  I am a free lancer and work in several state, I did one assignment in state of Punjab worth Rs. 3 lakhs, am I supposed to take registration.

No, only those who are operating from the state of Punjab are covered under PSDT. What is important is the location, where a freelancer is registered or has place of business in Punjab, he shall be required to take registration otherwise he is not covered under PSDT.

14.  What is the meaning of Employee under the Act?

An employee is subject to PSDT through deduction made by the employer. As per section 2(e) Employee means a person employed on salary or wages, and includes,-

(i) a Government servant receiving pay from the revenues of the Central Government or any State Government or the  Railway Fund;

(ii) a person in service of a body, whether incorporated or not, which is owned or controlled by the Central Government or any State Government where the body operates in any part of the State of Punjab, even though its headquarters may be situated outside the State of Punjab;

(iii) a person in service of a body, whether incorporated or not, which is owned or controlled by the State of Punjab, where the body operates in any part of the State of Punjab or outside the State of Punjab;

(iv) Government servant receiving pay from the revenues of the State of Punjab even though his office is situated outside the State of Punjab; and

(v) a person engaged in any employment of an employer not covered by sub-clauses (i), (ii) and (iii) above;

In brief all the employees are covered under PSDT

15.  What is the meaning of Employer under the Act?

As per PSDT Act an employer is liable to deduct  PSDT from employees and deposit the tax. As per section 2(f) employer in relation to an employee earning any salary or wages on a regular basis under him, means the person or the officer who is responsible for disbursement of such salary or wages, and includes the Head of the Office or any establishment as well as the manager or agent of the employer;

16.  My Employee is working with two or more employers what should I do?

Where the employee is employed with two employers, the employee shall furnish to his employer or employers a declaration in Form PSDT -5 to the effect that has obtained a certificate of enrolment and that he shall pay tax himself. In such case no tax shall be deducted by the employer in this case.

17.  I failed to deduct tax from my employee, is employer still liable to deposit the tax?

Yes, in case where employer fails to deduct tax from the employee, he shall still be liable to pay tax with the government. The onus of tax lies upon the employer irrespective of the fact whether he has deducted tax from employee or not.

18.  We are running a restaurant in state of Punjab, what are the consequences upon us?

A restaurant is equally covered under the term employer and hence they shall also be liable to deduct PSDT from its employees.

19.  Are daily wagers are also covered under the Act?

No daily wagers/casual labour is not covered under the provisions of the Act and hence no PSDT liable to be deducted by employer.

20.  I am a farmer, am I also liable to pay the tax. What would happen If I have land in Haryana and I sell the agriculture produce in state of Punjab.

Yes, where a farmer whose land is situated outside the state of Punjab but he sells his produce in Punjab, he shall be subject to PSDT. Farmer who cultivates out of land situated in Punjab itself is exempted from PSDT. Thus the person who cultivates land and sells the produce in state of Punjab itself shall be exempted.

21.  Whether the deductions under section 80C would be allowed for the purposes of Punjab State Development Tax.

The limit of minimum amount chargeable to Income Tax for the purposes of PSDT shall be calculated after deductions under Chapter VI of the Income Tax Act i.e. after deductions under section 80C.

22.  I work for 8 months in a year, am I supposed to pay tax for the full 12 months?

No. you are required to pay tax only for the period in which profession is conducted. For the period for which the person does not conduct any profession or business, he shall not be required to pay tax under PSDT.

23.  What are the Penalties applicable under the act?

S. No.	Description	Penalty
1.	Failure to take registration/enrolment	Rs. 50 per day for period of default
2.	Providing false information deliberately while applying for registration	Rs. 5,000
3.	Failure to file return as per law	Rs. 50 per day for period of default
4.	Failure to make payment of tax	50% of the tax due along with interest at the rate of 2% for period of default
5.	Failure to maintain books of accounts	Rs. 50 per day for period of default
6.	Failure to comply with any provisions of Act/Rules	Rs. 5,000 where the offence is continuing, Rs 50 per day.

24.  What are the Forms and their description as per Act

S. No.	Form No.	Description
1.	PSDT - 1	Application for Registration (for employers)
2.	PSDT – 2	Application for Enrolment (for others)
3.	PSDT – 3	Certificate of Registration (for employers)
4.	PSDT – 4	Certificate of Enrolment (for others)
5.	PSDT – 5	Certificate to be furnished by employee in case he is engaged in employment of more than one employer
6.	PSDT – 6	Annual Return (for Employer)
7.	PSDT – 7	Annual Return (for persons)
8.	PSDT – 8	Challan for Payment of Tax
9.	PSDT – 9	Notice u/s 6,7 and 10 of PSDT Act 2018
10.	PSDT – 10	Notice u/s 8(3) of PSDT Act 2018
11.	PSDT – 11	Notice u/s 8(4), 9(3) and section 15 of PSDT Act 2018
12.	PSDT – 12	Order of assessment/re-assessment of an employee/person
13.	PSDT – 13	Notice of demand for payment of tax/penalty
14.	PSDT – 14	Memorandum of Appeal

Disclaimer: The above FAQs are prepared on basis of our understanding of PSDT Act 2018. We shall not be responsible for any gains/loss which may arise due to this document. This document is used for professional development purposes only and as per the norms prescribed by law.