Do you know that professional tax is deducted from your salary on a monthly basis? Know all about Professional Tax in this article.
What is Professional Tax?
Professional tax is the tax imposed by the state government on the income earned by an individual through a profession. It is a tax on all kinds of professions, trades, and employment and levied based on the income of such profession, trade and employment.
Levied under Article 276(2) of the Indian Constitution, Professional Tax is deducted by the employer from the salaries of employees every month and remitted to the state. The maximum amount levied is Rs. 2500. Professional tax is compulsory and is exempt from income tax. The amount can be shown as a deduction from your salary income in your income tax-returns.
Professional Tax Rate
Professional tax varies from one state to another. Hence, it is different in different states. Every state has its own laws and regulations which govern professional tax of a particular state.
All the states follow a slab system on the income to levy professional tax. Here is the tax slab across key states in India.
|State||Income (p.m. or annual)||Tax (p.m.)|
|Maharashtra||Rs. 10,000+ (monthly)||Rs. 200 per month and Rs. 300 in Feb|
|Karnataka||Rs. 15,000+ (monthly)||Rs. 200|
|West Bengal||Rs. 40,000+ (monthly)||Rs. 200|
|Madhya Pradesh||Rs. 1.8 lakhs+ (annual)||Rs. 212|
|Tamil Nadu||Rs. 75,001+ (half yearly)||Rs. 1095|
|Andhra Pradesh||Rs. 20,000+ (monthly)||Rs. 200|
|Gujarat||Rs. 12,000+ (monthly)||Rs. 200|
|Odisha||Rs. 20,000+ (monthly)||Rs. 200|
States and Union Territories which levy Professional Tax
Following are the states and union territories which levy professional tax:
- Andhra Pradesh
- Tamil Nadu
- Madhya Pradesh
- West Bengal
Following are the states and union territories which do not levy professional tax:
- Arunachal Pradesh
- Himachal Pradesh
- Uttar Pradesh
- Andaman and Nicobar Islands
- Daman & Diu
- Dadra and Nagar Haveli
- Jammu & Kashmir
Professional Tax Applicability
Professional tax is collected by the Commercial Tax Department of the respective state. It goes directly to the municipal department. For salaried individuals, the employer is responsible for deducting professional tax and submitting the same to the state government. Corporates, partnership firms and sole proprietorship are required to pay professional tax on their trade/profession. To conduct the same, an employer needs to register and obtain both professional tax registration certificate to be able to pay professional tax and professional tax enrollment certificate to be able to deduct professional tax from their employees’ salary.
Individuals carrying a profession on a freelancing basis/business/without any employees are also required to register for professional tax. Professional tax is not applicable to parents or guardian of any person who is suffering from mental retardation or blind persons.
Violation of Professional Tax
Failure to pay professional tax is subject to penalty. The penalty is imposed by the respective state and varies from one state to another. Example: The state government of Maharashtra has imposed Rs 5/day as penalty for delay in registration plus Interest @ 1.25% per month of delay in payment plus a penalty of 10% of the amount of tax in case of delay/nonpayment of professional tax and Rs. 1000 – Rs. 2000 penalty for delay in filing the returns.
Payment of professional tax is an important source of revenue for the state government. The state government utilises this amount to build infrastructure so that one can carry out the profession in a particular state.