Professional Tax : Meaning, Rates, and Applicability

In your Form 16 or Salary slips you may have come across “Professional Tax” along with other Salary breakups. Your employer pays this tax to the state government on your behalf. The deduction is generally of INR 200. The amount of professional tax differs from state to state. Not all states in India chose to levy this tax. State Government is also empowered to make laws with respect to profession tax.

What is Professional Tax?

It is not only the tax levied on professionals, but it is a tax on all kinds of professions, trades, and employment. And it 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 threshold if any. This tax is levied by a state government. Further, this tax can be paid either online/offline.

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Professional Tax Slab

The rate of professional tax varies from one state to another. However, the limit has been set to Rs. 2500 per year as per Article 276 of the Constitution. Therefore, each state declares a slab, and the tax is deducted on the basis of these slabs. Here are some illustrative Profession Tax slabs in a few states:

Maharashtra

Income per month (INR) Tax per month in INR
Up to 7500 for Men Nil
Up to 10000 for Women Nil
7500 TO 10000 for Men 175
10000 and above 200 ( And 300 for February)

Gujarat:

Income per month (INR) Tax per month (INR)
Upto 5999 Nil
6000 to 8999 80
9000 to 11999 150
More than 12000 200

Karnataka:

Income per month (INR) Tax per month (INR)
Upyo 15000 Nil
More than 15000 200

Tamil Nadu:

Income per month (INR) Tax per month (INR)
Upto 21000 Nil
21,001 to 30,000 100
30,001 to 45,000 235
40,001 to 60,000 510
60,001 to 75,000 760
75,001 and above 1095

Who is Responsible for deducting Profession Tax?

Self-employed persons who carry out their profession or trade on their own and fall in the ambit of profession tax are liable to pay the tax themselves to the state government. In the case of salaried individuals and wage earners, the employer is liable to deduct profession tax on a monthly basis. Therefore, the employer needs to register and obtain both the Professional Tax Registration Certificate to be able to pay professional tax on his trade or profession and Professional Tax Enrolment Certificate to be able to deduct the tax from his employees and pay. List of forms for payment of Profession Tax.

Consequences

If a person fails to get registration, then he will be liable to a penalty for the period during which he remains unregistered. However, the actual amount of penalty or interest shall depend upon State’s Legislation. Non-payment of tax or a late payment attracts a 10% additional tax.

Procedure to Pay Professional Tax

In general, a professional tax may be paid either online/offline. Further, depending on the State’s requirement, professional tax returns also need to be filed at specified intervals.

FAQs

Why does Profession tax differ from one state to another?

As professional tax is levied by the state government, it usually differs from one state to another. Each state has its own slab that it declares and the profession tax is deducted based on these slabs.

Is Profession tax applicable in Union territories?

As Union Territories are small regions of the country, they tend to generate lower revenue than states. Hence, professional tax is not applicable to employees working in a Union Territory.

Who is exempted professional tax?

There are a few categories of people that get benefit of tax exemption:
– Senior citizens are exempt from professional tax.
– Parent of a mentally challenged child is exempt from this tax.
– Persons or parents of children suffering from physical disability are exempt from paying professional tax.

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