Professional Tax is a tax levied by state governments in India on individuals earning income through professions, trades, or employment. It is applicable to salaried employees, self-employed professionals, and businesses.
Many salaried employees might be very well aware of the term ‘professional tax’ as it would have been mentioned in the payslips/Form 16 issued to them. But all of them may or may not understand what it is and why it is appearing in their payslips/Form 16 as a deduction from their salary income.
Who is Liable to Pay Professional Tax?
| Category | Responsibility |
|---|
| Salaried Employees | Employer deducts and pays to the state |
| Self-employed Professionals | Must register and pay directly |
| Business Owners | Must register and pay on business income |
What is a Professional Tax, and Who Levies it?
The nomenclature ‘Professional tax’ could be one of those terms which do not completely convey the real meaning of the term. Unlike the name suggests, it is just not the tax levied only on professionals.
Professional tax is a tax on all kinds of professions, trades, and employment and is levied based on the income of such profession, trade and employment. It is levied on employees, a person carrying on the business, including freelancers, professionals, etc., subject to income exceeding the monetary threshold if any.
As per Article 246 of the Constitution of India, only the Parliament has the exclusive power to make laws with respect to the Union List, which includes taxes on income. The state has the power to make laws only with respect to the Concurrent and state list.
However, professional tax though is a kind of tax on income levied by the state government (not all states in the country choose to levy professional tax). The state government is also empowered to make laws with respect to professional tax though being a tax on income under Article 276 of the Constitution of India, which deals with tax on professions, trades, callings and employment.
Professional Tax Rate
Professional tax being levied by the state government is different in different states. Every state has its own laws and regulations to govern the professional tax of that particular state. However, all states follow a slab system based on income to levy professional tax.
Further, Article 276 of the Constitution, which empowers the state government to levy professional tax, also has provided for a maximum cap of Rs.2,500, beyond which professional tax cannot be charged to any person.
Few illustrative slabs in the country
- Professional tax rate slabs in Karnataka
Monthly salary/wage up to Rs 25,000 | NIL |
Monthly salary/wage > Rs 25,000 | Rs 200 per month |
- Professional tax rate slabs in Andhra Pradesh
Monthly salary/wage up to Rs 15,000 | NIL |
Monthly salary/wage between Rs 15,001 – Rs 20,000 | Rs 150 per month |
Monthly salary/wage > Rs 20,000 | Rs 200 per month |
- Professional tax rate slabs in West Bengal
Monthly salary/wage up to Rs 10,000 | Nil |
Monthly salary/wage between Rs 10,001 – Rs 15,000 | Rs 110 |
Monthly salary/wage between Rs 15,001 – Rs 25,000 | Rs 130 |
Monthly salary/wage between Rs 25,001 – Rs 40,000 | Rs 150 |
Monthly salary/wage > Rs 40,000 | Rs 200 |
- Professional tax rate slabs in Maharashtra
Monthly salary/wage up to Rs 7,500 (men) | Nil |
Monthly salary/wage between Rs 7,501 – Rs 10,000 (men) | Rs 175 |
Monthly salary/wage > Rs 10,000(men) | Rs 200 (Rs 300 for the month of February) |
Monthly salary/wage up to Rs 25,000 (women) | Nil |
Monthly salary/wage above Rs 25,000 (women) | Rs 200 (Rs 300 for the month of February) |
Exemptions in Professional Tax
- Member of Force (Governed by Army, Air Force, Navy Act)
- An individual suffering from mental or physical disability. Disability can be blindness, deafness, etc.
- Parent of a child suffering from a disability
- Charitable hospitals are present in places that come below the taluk level
- Badli workers (temporary workers that are employed in a factory)
- Individuals running an educational institute in respect of their branches teaching classes upto 12th standard or pre-university.
- A foreign individual who has been employed by the relevant state
- Any individual above 65 years
- Women who are solely engaged as agents under the Government’s Mahila Pradhan Kshetriya Bachat Yojana
FAQs
Who is Responsible to Collect Professional Tax?
Professional tax is collected by the Commercial Tax Department. The commercial tax department of the respective states collects it which ultimately reaches the fund of the municipal corporation.
How to Pay Professional Tax? Is Any Return to be Filed?
Professional tax is a direct tax levied by the state government. As a result, the form of payment may differ from one state to the next.
Professional tax, on the other hand, can be paid both online and offline. To pay professional tax, you must go to the official website of the relevant state.
It is important to note that if you are a salaried individual, then such professional tax will be collected and remitted by your employer.