You must have noticed, that there is always a deduction by the name of professional tax in your payslips, ranging from Rs. 200 to Rs. 300. But, what is an experienced tax in your salary slips, and why is it deducted by your employer?
This is a type of direct tax which is levied on all individuals earning money via any medium, be it a job, trading, hobby, or a profession like doctors and lawyers. So, at what rate is a professional tax levied? And is there any way one can get an exemption from professional tax? Let’s find out the answers to all these questions and more.
What is Professional Tax?
So, what is a professional tax in India? According to Article 276 (2) of the Indian Constitution, every state and union territory has the right to levy a tax on “every person engaged in any profession, trade, calling, or employment.” It is basically levied in return for the infrastructure provided by the state or the UT, which lets individuals earn a living. In this regard, it is quite similar to the Income Tax; however, the only difference is that the central government does not levy it. There are some states and UTs which do not levy any professional tax.
To Whom is Professional Tax Applicable in India?
The applicability of professional tax rests on the following class of persons –
- A Hindu Undivided Family (HUF)
- An Individual
- A Company/Firm/Co-operative Society/Association of persons or a body of individuals, whether incorporated or not
Key Takeaways
- Professional tax is a direct tax levied by the state/UT government on all individuals earning an income
- The minimum deduction is Rs. 200 and the maximum is Rs. 2,500
- The rate varies from one state to another
- There are some states which do not levy any professional tax
How does Professional Tax Work?
In order to know how to pay professional tax online, it is important to first consider which state you reside in. This is because some state governments do not levy professional taxes, so it is not required to calculate this in such states.
Once you determine the tax slab of your state, you can then look figure out the income bracket you fall under. These two factors, i.e., your state and income bracket, will help you calculate your monthly or annual tax payable. You can also simplify the process by learning what is professional tax in India and how to pay this online.
Look at this example for a more precise understanding,
Suppose you are a working individual in Gujarat with an earning of Rs. 20,000 per month; your annual professional tax will be Rs. 2400. At the same time, the same salary in Maharashtra will sum up to Rs. 2500. Moreover, there are some exemptions to professional tax as well. For example, this tax won’t be deducted from the salary of an individual over 65 years of age or who are disabled.
Professional Tax Vs TDS: Know The Key Differences
It is essential to understand that professional tax and TDS are two different concepts. TDS stands for Tax Deducted at Source, which is the amount that is deducted from the earnings of an entity or an employee by the entity or the employer who is paying the former. TDS deductions are made on the basis of pre-fixed slab and income. This deduction acts as a tax that has been paid in advance for the income tax.
On the other hand, a professional tax is a state tax which is levied on individuals or entities who have a source of earning by being employed or by carrying out business activities in a particular state or UT. Professional tax is deducted from the gross earnings of a professional. This type of tax is revenue for the state/UT government, which eventually reaches the municipal corporation of the respective state/UT. This does not form part of income tax.
Statewise Professional Tax Applicability
Since the professional tax is levied on the state government, it tends to differ for different states. Every state has a different slab that it declares and then the professional tax is deducted based on these slabs. In fact, there are some states and union territories that do not even charge professional tax.
Moreover, it is paid by dividing the annual professional tax due into 12 equal instalments paid every month, except the one paid in the month of February which is higher than the other months.
List of States and UTs Which Levy Professional Tax
Following are the states and UTs which levy professional tax –
- Andhra Pradesh
- Assam
- Bihar
- Chhattisgarh
- Gujarat
- Jharkhand
- Karnataka
- Kerala
- Madhya Pradesh
- Maharashtra
- Manipur
- Meghalaya
- Mizoram
- Nagaland
- Odisha
- Puducherry
- Sikkim
- Tamil Nadu
- Telangana
- Tripura
- West Bengal
List of States and UTs Which Do Not Levy Professional Tax
Following are the states and UTs where no professional tax is levied –
- Andaman and Nicobar Islands
- Arunachal Pradesh
- Chandigarh
- Dadra and Nagar Haveli
- Ladakh
- Delhi
- Goa
- Haryana
- Himachal Pradesh
- Jammu & Kashmir
- Lakshadweep
- Punjab
- Rajasthan
- Uttar Pradesh
- Uttarakhand
Professional Tax Slabs in Different Indian States and Union Territories
| State | Monthly Income (in Rs.) | Tax Amount Per Month (in Rs.) |
| Andhra Pradesh | Up to 15,000 15,001-20,000 20,001 & above | Nil 150 200 |
| Assam | Up to 10,000 10,001-15,000 15,001-24,999 25,000 & above | Nil 150 180 208 |
| Bihar | Up to 25,000 25,001-41,666 41,666-83,333 83,334 & above | Nil 83.33 166.67 208.33 |
| Goa | Up to 15,000 15,001-25,000 25,001 & above | Nil 150 200 |
| Gujarat | Up to 5,999 6,000-8,999 9,000-11,999 12,000 & above | Nil 80 150 200 |
| Jharkhand | Up to 25,000 25,001-41,666 41,667-66,666 66,666-83,333 83,334 & above | Nil 100 150 175 208 |
| Karnataka | Up to 14,999 15,000 & above | Nil 200 |
| Kerala | Up to 1,999 2,000-2,999 3,000-4,999 5,000-7,499 7,500-9,999 10,000-12,499 12,500-16,666 16,667-20,833 20,834 & above | Nil 20 30 50 75 100 125 166 208 |
| Madhya Pradesh | Up to 18,750 18,751-25,000 25,001-33,333 33,334 & above | Nil 125 167 208 |
| Maharashtra | Up to 7,500 7,501-10,000 Above 10,001 | Nil 175 200 |
| Manipur | Up to 4,250 4,251-6,250 6,251-8,333 8,334-10,416 Above 10,417 | Nil 100 167 200 208 |
| Meghalaya | Up to 4,166 4,167-6,250 6,251-8,333 8,334-12,500 12,501-16,666 16,667-20,833 20,834-25,000 25,001-29,166 29,167-33,333 33,334-37,500 37,501-41,666 41,667 and above | Nil 16.50 25 41.50 62.50 83.33 104,16 125 150 175 200 208 |
| Nagaland | Up to 4,000 4,001-5,000 5,001-7,000 7,001-9,000 9,001-12,000 12,000 & above | Nil 35 75 110 180 208 |
| Odisha | Up to 13,304 13,305-25,000 25,001 & above | Nil 125 200 (11 months) & 300 (1 month) |
| Puducherry | Up to 16,666 16,667-33,333 33,334-50,000 50,001-66,666 66,667-83,333 Above 83,334 | Nil 41.66 83.33 125 166.67 208.33 |
| Punjab | Above 20,833 | 200 |
| Sikkim | Up to 20,000 20,001-30,000 30,001-40,000 40,000 & above | Nil 125 150 200 |
| Tamil Nadu | Up to 3,500 3,501-5,000 5,001-7,500 7,501-10,000 10,001-12,500 Above 12,501 | Nil 22.50 52.50 115 171 208 |
| Telangana | Up to 15,000 15,001-20,000 20,001 | Nil 150 200 |
| Tripura | Up to 5,000 5,001-7,000 7,001-9,000 9,001-12,000 12,001-15,000 15,001 & above | NIL 70 120 140 190 208 |
| West Bengal | Up to 10,000 10,001-15,000 15,001-25,000 25,001-40,000 40,001 | Nil 110 130 150 200 |
How to Pay Professional Tax?
Besides knowing what is professional tax in India, it is also important to know how it is paid. This can be well understood by dividing the taxpayers into two categories – self-employed and salaried-
- Self-employed – Individuals, HUFs, and corporates falling under this category need to obtain a Registration Certificate from the Commercial Taxes Department of their state or UT and deposit the applicable professional tax themselves to the department on a monthly or yearly basis.
- Salaried – For all salaried individuals, the professional tax is deducted from the salary by their employer on a monthly basis. So, if you were wondering what a professional tax on salary slips is, you know it now.
The amount of professional tax payable depends on the tax slab in which the taxpayer falls, corresponding to their annual taxable income. The minimum and maximum amount stands at Rs. 200 and Rs. 2,500 respectively.
We hope now, we have answered your questions like what is professional tax in India and who is required to pay it. Now, it’s time to dig deeper and learn more!
Are There Any Professional Tax Exemptions?
There are certain individuals that are exempted from this tax according to the Professional Tax Rules. Following is a list of individuals who are exempted from paying this tax:
- Parents of children with permanent or mental disability
- According to the Air Force Act, 1950, Army Act, 1950, and the Navy Act, 1957, the members of forces are exempted from the professional tax
- Individuals suffering from permanent disability
- Women agents working under the Director of Small Savings or Mahila Pradhan Kshetriya Bachat Yojana
- Individuals who have completed or are above the age of 65 years
Conclusion
We hope that you are now clear about what professional tax is in India. Unlike income tax, it is levied by the government of your state or union territory. Since it is levied by states, the amount of professional tax payable by taxpayers falling in different income brackets varies for different states and UTs. In total, there are 15 states and UTs which do not levy any professional tax, like Delhi, Haryana, Rajasthan, and Uttar Pradesh. Also, the maximum amount which can be levied as professional tax is capped at Rs. 2,500. Be a responsible Indian citizen and always pay your taxes in time.
FAQs
Professional tax can be defined as a direct tax deducted from your employer’s salary. Since the state government levies this tax, it tends to vary depending on the state you live in. The maximum amount you can be charged is Rs. 2500. In states like Andhra Pradesh, Gujarat, Maharashtra, etc., a tax slab is applicable.
Since Union Territories are relatively more minor regions that are governed by the Central Government and generate less revenue as compared to states, no union territory in India except Puducherry levies the professional tax.
Professional tax is applicable for all kinds of professions, but it does depend on the income of an individual. It will be applicable if your income exceeds the specified limit as per the Laws applicable in the state where you reside and work in.
The minimum professional tax deduction is INR 200 and the maximum is INR 2,500, but it can differ according to the tax slab for some specific states/UTs and the income of the person in question.
Yes, this is a compulsory tax which must be paid by all professionals and entities including employees, merchants, business owners, companies, firms etc. Non-payment of professional tax may attract a penalty from the nodal agency i.e. the Commercial Taxes Department of the state/UT.
If you are filing your income tax returns for your company or as a professional, you will need to declare your gross income based on the ITR form you are filing. Further, based on other parameters like investments, rent, etc., you will also be quoting the professional tax liability for the year.
Yes, penalties can be levied on an individual/entity in the case it is not paid on time or if the employer/entity has registered themselves for deductions but fails to deposit the full tax amount. The penalty amount depends on the state government/UT levying it.
Since the state government levies the professional tax, there is no fixed rate at which this tax is charged around the country. There are two factors on which the tax rate for professional tax depends, i.e., your state of residence and the income bracket you fall under.
Professional tax is usually paid at the end of the month, presuming that you have continued the profession in that month. Hence, once this is paid, there can be no refund. However, you can claim the deduction while filing your income tax return.
It can be calculated based on the predetermined slabs, the monthly income, and the state that you reside in. It is usually around Rs. 200 per month, with the maximum payable being Rs. 2500 in a year.
While TDS is the amount the employer deducts based on the predetermined tax deduction at the source slab, which includes earnings from salary, rent, interest savings, etc. Hence, TDS deducted works as a tax one has to pay in advance.
Read more: How to Pay Professional Tax Online.
