What Is Professional Tax

What is Professional Tax, Slab Rates & Applicability?

A monthly deduction under the heading "Professional Tax" will always be on
your payslips. It combines basic pay, HRA, and transportation costs.

Written by : Daina Mathew

Reviewed by : Jasmeet Bedi

Jasmeet Bedi

2020-06-25

3377 Views

10 minutes read

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If you are employed and earn a regular salary, you are required to pay professional tax. You must have seen the term professional tax in the salary slips that you receive every month. It is written below your gross salary, allowance, and HRA.

Professional tax is deducted from your gross salary along with TDS, EPF and any other deduction.

However, this tax doesn’t mean that it is levied only if you are in professional practice such as a doctor, lawyer etc. If you earn a salary, you are eligible to pay this tax. Let us discuss professional tax in detail.

Table Of Content:

What is Professional Tax?

Professional tax is a direct tax that is deducted from your gross salary by your employer.

This tax is levied by the state government and thus can vary depending on the state you live in. The maximum limit of which you can be charged is Rs 2500.

The tax is calculated based on the slabs. Each state can have different salary slab rates for the calculation of professional tax. Andhra Pradesh, Maharashtra, Gujarat are some of the states where this tax is applicable.

How Does Professional Tax Work? 

To understand what is professional tax, let us first understand how professional tax works. Like every direct tax formula, Professional Tax in India has its formula and the slab rate is set by the individual state or union territory. According to Article 246 of the Constitution, only Parliament has the power to frame laws for subjects on the Union List that includes tax on income.

However, in case of the State and Concurrent lists, the state can make it optional to levy professional tax in India. This tax is deductible from your taxable income. Thus most of the Indian states and union territories levy professional tax since it is a source of their revenue. It does not mean that only people who practise a profession need to pay it. 

Professional tax applicability applies to other sections as well. Here is the list of the parties that are required to pay professional tax.

  1. Companies and Business Firms
  2. Limited Liability Partnerships (LLP)
  3. Corporations
  4. Co-op Societies and Associations
  5. Hindu Undivided Family
  6. Clubs
  7. Lawyers and Legal Practitioners
  8. Contractors
  9. Architects
  10. Engineers
  11. Insurance agents
  12. Chartered Accountants (CA)
  13. Company Secretary (CS)
  14. Surveyors
  15. Tax consultants
  16. Management consultants
  17. Doctors and other medical representatives

What is the Maximum Limit for Professional Tax in India? 

Although the tax is levied depending upon the income of the individual, the maximum amount any State can levy as Professional Tax is restricted to ₹2,500.

Statewise Professional Tax Slabs

Professional slab rate varies from state to state. Some of the states which currently impose a professional tax in India are West Bengal, Maharashtra, Gujarat, Andhra Pradesh, Kerala, Tamil Nadu, Karnataka, Bihar, Assam, Madhya Pradesh etc.

Professional Tax in West Bengal
 

Salary Per MonthTax
Up to ₹10,0000
₹10,001 to ₹15,000₹110
₹15,001 to ₹25,000₹130
₹25,001 to ₹40,000₹150
More than ₹40,000₹200


Professional Tax in Maharashtra
 

Salary Per MonthTax
Till ₹7,500 (men)NA
Till ₹10,000 (women)NA
₹7,501 to ₹10,000₹175
₹10,000+₹200 (300 for the last month)


Professional Tax in Karnataka
 

Salary Per MonthTax
Up to ₹14,999NA
15,000+₹200


Professional Tax in Andhra Pradesh
 

Salary Per MonthTax
Up to ₹15,000NA
₹15,001 to ₹20,000₹150
₹20,000+₹200


Professional Tax in Tamil Nadu
 

Salary Per MonthTax
Up to ₹3,500NA
₹3,5001 to ₹5,000₹22.5
₹5,001 to ₹7,500₹52.5
₹7,501 to ₹10,000₹115
₹10,001 to ₹12,500₹171
Above ₹12,500₹208


Professional Tax in Telangana
 

Salary Per monthTax
Up to ₹15,000NA
₹15,000 to ₹20,000₹150
₹20000+₹200


Professional Tax in Kerala
 

Salary per monthTax
Up to ₹1999NA
₹3,000 to ₹4,999₹20
₹3,000 to ₹7,499₹30
₹5,000 to ₹7,499₹50
₹7,500 to ₹9,999₹75
₹10,000 to ₹12,499₹100
₹12,500 to ₹16,666₹125
₹16,667 to ₹20,833₹166
₹20,834+₹208

Who is Responsible to Collect and Pay Professional Tax?

For employees, their employer is responsible for deduction and payment of professional tax to their respective State Government as per the rate slab, and also for registering and obtaining professional tax registration certificates. Individuals involved in freelance occupations without employees also need to register for this tax, as per the slab provided by the state government.

Do keep in mind, professional tax is subject to exemptions provided by respective states to specific categories.

Did You Know?

Freelancers operating independently must register for professional tax in accordance with state regulations, which may include financial thresholds. 

- Clear Tax

Claim Settlement Ratio

How to Pay Professional Tax?

Professional Tax is a direct tax that is not levied by the central government. It is a state-levied tax. Thus, the mode of payment may also vary from State to State.

However, in general, professional tax can be paid via both online and offline modes. You need to visit the relevant state’s official website for payment of professional tax. For example, if you reside in West Bengal you need to log in to their official website: http://wbprofessiontax.gov.in/

Exemptions in Professional Tax

Though every individual who receives a regular income (salary) is required to pay the Professional Tax, some individuals are exempt from it. So, if you fall under the categories mentioned below, you do not need to pay Professional Tax.

  1. Member of Force (Governed by Army, Air Force, Navy Act)

  2. An individual suffering from mental or physical disability. Disability can be blindness, deafness, etc.

  3. Parent of a child suffering from a disability

  4. Charitable hospitals are present in places that come under below taluk level.

  5. Badli workers (temporary workers that are employed in a factory)

  6. Individual running an educational institute

  7. A foreign individual who has been employed by the relevant state

  8. Any individual of above 65 years

  9. Women who are solely engaged as agents under the Government’s Mahila Pradhan Kshetriya Bachat Yojana

Professional Tax Deduction 

Yes, there is a professional tax deduction available which is paid under Section 16 of the Income Tax Act of 1961.

Consequences of Violation of Professional Tax Regulation 

Each state has its own penalty rates for failure to register for professional tax in time and delay in filing the returns. There is also a penalty for missing the due date, which again depends on the state legislation.

For example: In Maharashtra, the penalty for late registration is ₹5/day. There is also an interest of 1.25%/month for late payment, a 10% penalty on the tax amount in the case of non-payment/delay of professional tax, and a penalty of ₹1000 –2000 for late return filing.

Final Words 

In conclusion, professional tax is a state-imposed tax on professions, trades, callings, and employment in India, serving as a significant source of revenue for state governments. The tax structure and slab rates vary across states, reflecting the diverse economic conditions and governance policies within the country. 

Generally, the rates are progressive, with higher income brackets incurring higher tax liabilities. Employers are responsible for deducting professional tax from salaries and remitting it to the state government, while self-employed individuals must directly comply with their state's regulations. Understanding the specific provisions and compliance requirements within one's state is crucial for both employers and employees to ensure adherence to legal obligations and avoid penalties. The professional tax, though relatively minor in comparison to other taxes, plays an essential role in contributing to state finances, thereby supporting regional development.

Glossary:

Gratuity: A gratuity is an amount of money that customers typically give to specific employees in the service industry in addition to the base fee for the work they have completed.

State-levied tax: State governments set their own rates of taxation, collect them, and keep the proceeds as each state has a different taxing structure. Some taxes that are imposed and collected by the state include motor vehicle taxes, professional taxes, and VAT.

Slab rate: The income range that is subject to this tax is known as the Income Tax Slab. 

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FAQs on Professional Tax

 

Professional Tax is a direct tax that, unlike Income Tax, is governed by states and not the central government. Since Union territories come under the control of the Central Government, these are not subject to paying the professional tax.

Thus, all the 9 union territories; Andaman and Nicobar Islands, Chandigarh, Dadra, and Nagar Haveli and Daman and Diu, Delhi, Jammu and Kashmir, Lakshadweep, Ladakh, and Puducherry do not need to pay.

Also, most of these are very small areas and contribute less to the economy so they are exempted from this tax.

Yes, professional tax is compulsory. You are required to pay if you are a salaried individual. That is you receive a regular salary for your work.

However, the amount that you will have to pay towards your professional tax will depend on the state you reside in. Each state has different slab rates regarding the tax rates. The amount can vary from ₹200-2500.

 

In the following cases, you are not required to pay the tax:

  • If your income is below the slab rate of the relevant state
  • If you live in a state/UT where professional tax is not applicable
  • If you come under the exemptions list

 

 

Yes, professional Tax is applicable for freelancers also. Thus, even if you are a freelancer and generate your income is more than the minimum prescribed limit of the state you are in, then you will have to pay the professional tax.

 

You can fill out the Professional Tax Application form by simply visiting the official website of Professional Tax.

Here are the next steps you can follow:

- Click on the ‘Enrolment Application’ section. 

- There’ll be two options: ‘new’ and ‘enrolled’. If you are using the site for the first time, click on the ‘new’ button.

- Enter the details asked

- Make the payment 

Once the payment is done, you will receive a receipt, which you must download and keep for future reference.

In comparison with income tax, professional tax is a direct tax that is controlled by the states instead of the central government.

 

Professional tax is a type of direct tax that your employer withholds from your gross pay. Because it is imposed by the state government, the tax you pay will differ according to the state you reside in. There is a maximum amount of ₹2500 that you might be charged. The slabs are used to compute the tax.

Every month, your professional tax is calculated based on your gross salary, minus any deductions like retirement contributions, gratuities, and loans. Here are the steps you can follow to calculate your professional tax on salary:

Step 1: Check to see if the state of residency accepts the professional tax

Step 2: If yes, calculate the tax amount based on your monthly income.

Step 3: Verify the tax slab rates based on your income