January 26, 2022

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Meaning Profession in Personal Income Tax (PITA)

Meaning Profession in Personal Income Tax (PITA)
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In Personal Income Tax, the profession is different from vocation and employment. Although a professional can get paid employment, he or she must comply with the ethics of the profession. In this article let us discuss it.

Definition of Profession

A profession is an occupation in which an individual has rigorous training on a specialized skill set, knowledge, and ethics. A person who completes the training is referred to as a professional.

Key Explanations of Profession

An occupation. These are any legal economic activities people do to earn a living. It could be an unskilled job like cleaner to a more skilled job such as a painter. Note that painter is a profession if it has an association. Occupation is divided into three parts. That is, primary, secondary and direct.

Those in primary occupation extract raw materials from land, sea, and air. The farmers fall under this category. Secondary occupation involved in production and assembling of components. While those in the service occupation provide non-production jobs to earn a living.

Rigorous training. A profession involves rigorous training. You must be trained to qualify. The training is not a one-day or week stuff. It takes a minimum of a year of training to be a professional. Plus the individual must partake of on-the-job training to qualify.

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A plumber may undergo three years of training and another one year on the job to become a professional. A chartered accountant goes through several years of training by gathering educational knowledge and after which he or she is required to have a minimum of two years on the job experience to qualify as one. While an auditor is three and a half years’ on-the-job training to qualify.

Skillset and knowledge. In a profession, the professional has a specialized skill set and knowledge. A plumber will only have the specialized knowledge of plumbing and not banking. Also, a chartered accountant will have a skill set and knowledge of accounting and finance and not mechanics.

Ethics. What differentiates a profession from other types of occupation is ethics. All professionals must comply with their profession’s code of ethics. A person can lose his or her license or certificate if they failed to comply with the etiquette of the profession.

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Why this is Necessary for Personal Income Tax (PITA)

In identifying the income of a person, the tax authority needs to understand if the taxpayer is on a contract of employment or contract for employment. While the former is charged under PAYE, the latter the assessed base on trading income. A professional falls under contract for employment. Therefore, the PAYE does not apply.

But there is an exception. A professional accountant can work under a contract of employment if he works with a company. Therefore, PAYE tax applies. However, if the chartered accountant has an audit firm or an accounting firm, then he will be assessed under trading income.

Conclusion

The profession is a job that requires a specialized set of skills and knowledge. A professional is bound to comply with its code of ethics. And that’s what makes it different from other types of jobs. Finally, most of them are assessed to tax on a preceding year basis. Why? They fall under contract for employment.

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