Being aware of the different taxes that affect your earnings is vital for any individual. One such significant aspect to pay attention to is the Professional Tax. Whether you work as an employee or are self-employed, understanding this tax can greatly improve financial management and ensure adherence to tax regulations.
This blog aims to provide everything you need to know about professional tax, including tax slab rates, who it applies to, exemptions, and more.
Table of contents:
- What is Professional Tax in India?
- Who is Responsible for Collecting Professional Tax?
- Who Is Responsible for Paying Professional Taxes?
- Applicability of Professional Tax
- How to Pay Professional Tax?
- How to Fill in the Professional Tax Application Form?
- What are the Consequences of Violation of Professional Tax Regulation?
- Professional Tax Rates
- State-wise Professional Tax Slabs
- Exemptions in Professional Tax
- What is the Professional Tax Limit?
- When is Professional Tax Deducted?
- Why is Professional Tax Different for Different People?
- Where should You Show Professional Tax in ITR?
- Difference Between Professional Tax and TDS
What is Professional Tax in India?
Professional tax is a tax imposed on individuals who are engaged in various professions, trades, and employment. It is calculated based on the income earned from these activities. This tax applies to employees, freelancers, professionals, and individuals conducting businesses, among others, provided their income exceeds a certain threshold.
According to Article 246 of the Constitution of India, only the Parliament has the exclusive authority to enact laws related to the Union List, which includes taxes on income. However, professional tax, being a tax on income, is levied by state governments, although not all states in the country choose to impose it. The state government is empowered to establish laws regarding professional tax under Article 276 of the Constitution of India, which specifically addresses taxes on professions, trades, callings, and employment.
It is important to note that professional tax is considered as a deductible amount for the purpose of the Income Tax Act of 1961. This means that it can be subtracted from an individual’s taxable income, resulting in a potential reduction in their overall tax liability.
Who is Responsible for Collecting Professional Tax?
The responsibility of collecting professional tax lies with the respective state’s Commercial Tax Department or any other department as mandated by the state government. These authorities ensure the collection of professional tax from eligible individuals, businesses, and professionals as per the applicable laws and regulations.
Who Is Responsible for Paying Professional Taxes?
- The employer is responsible for deducting and paying professional tax on behalf of employees.
- Employers, including businesses and self-employed individuals, are also liable to pay professional tax based on their trade or profession.
- Freelancers without employees may also be required to register and pay professional tax, subject to applicable thresholds.
- Some states provide exemptions from professional tax for specific categories, such as parents or guardians of mentally challenged individuals or visually impaired persons.
Notes:
- Levy of professional tax may have exemptions granted by the state for certain categories of individuals. For instance, parents or guardians of mentally challenged persons, or blind individuals, among others, may be exempted from the payment of professional tax in Karnataka.
- Specific requirements and exemptions may vary from state to state.
Applicability of Professional Tax
This tax applies to every earning employee under an employer or self-employed earners across all industries. Here are all the people who are liable for a professional tax deduction on their earnings:
- Individual
- Firm
- Company
- Cooperative society
- Association of persons or a body of individuals
- Limited Liability Partnerships (LLPs)
- Clubs
- Hindu Undivided Family (HUF)
- Legal practitioners such as solicitors
- Contractors
- Architects
- Chartered accountants (CAs)
- Company Secretaries (CSs)
- Surveyors
- Engineers
- Medical representatives such as doctors, medical consultants, and dentists
- Insurance agents
- Tax consultants
- Management consultants
How to Pay Professional Tax?
Self-employed individuals who are not associated with any third-party organization or firm are also liable to pay professional tax, similar to employed individuals. The key difference is that self-employed individuals are responsible for paying this tax themselves.
Professionals such as doctors, technology experts, chartered accountants, medical professionals, and freelancers fall into the category of self-employed individuals who are required to pay professional tax where applicable. The first step in this process is obtaining a professional tax registration number. Once obtained, individuals can choose to pay their professional tax either online or offline.
Pay Professional Tax Offline
For offline payment, taxpayers can visit one of the many tax offices and fill out the necessary professional tax form with their details. By submitting this form along with the outstanding professional tax amount, they can clear their tax liabilities.
Pay Professional Tax Online
To pay professional tax online, individuals need to register on the online professional tax portal of the state where their business is located. This registration should provide them with a unique registration number. After the details are verified and the necessary certificates are issued, individuals can begin clearing their professional tax dues online. Payment can be made using debit or credit cards or internet banking.
Using the online portal offers convenience and saves time. There is no need to physically visit tax offices to make the payment; individuals can simply transfer the outstanding amount with a click of a button.
How to Fill in the Professional Tax Application Form?
- Visit the official website of Professional Tax at http://pt.kar.nic.in
- Click on the ‘Enrolment Application’ option located on the left-hand side of the page
- Choose ‘New’ if you are paying professional tax for the first time, or ‘Enrolled’ if you have filed tax returns before
- Provide the necessary details, including the financial year, professional tax office, type of return, business status, and class of person
- Click on ‘Next’ to proceed
- Make the payment using a credit card, debit card, or net banking
- After making the payment, download the receipt for your records.
What are the Consequences of Violation of Professional Tax Regulation?
The following are the consequences of violating professional tax regulations:
- Once professional tax legislation becomes applicable, not registering for professional tax may levies penalty and the amount depends on the respective state’s legislation.
- Failing to make payment and file the return within the specified due date may also levies penalty.
Note:
- Penalty for late registration of professional tax in Maharashtra Rs.5 per day.
- Monthly interest rate for late payment is 1.25%
- For non-payment or delay of professional tax, penalty of 10% on the tax amount will be levied
- For late return submission, a penalty amount charged ranges between Rs.1,000 to Rs.2,000
Professional Tax Rates
The professional tax imposed by state governments varies across different states in India. Each state has its own set of laws and regulations governing professional tax. However, all states follow a slab system based on income to determine the professional tax liability.
Moreover, Article 276 of the Indian Constitution grants the state government the authority to levy professional tax and also sets a maximum limit of Rs. 2,500. This means that professional tax cannot exceed this cap for any individual, regardless of their income.
State-wise Professional Tax Slabs
Since a professional tax is a state-imposed tax, it is bound to vary with every state. A professional tax is deducted based on the tax rate declared by the respective state government. The slab rates for different states imposing this tax are mentioned as per the level of monthly income below.
West Bengal
| Salary Per Month (INR) | Tax Amount |
| Up to INR 10,000 | NA |
| INR 10,001 to INR 15,000 | INR 110 |
| INR 15,001 to INR 25,000 | INR 130 |
| INR 25,001 to INR 40,000 | INR 150 |
| More than INR 40,000 | INR 200 |
Maharashtra
| Salary Per Month (INR) | Tax Amount |
| Up to INR 7,500 (men) | NA |
| Up to INR 10,000 (women) | NA |
| INR 7,501 to INR 10,000 | INR 175 |
| INR 10,000+ | INR 200 (300 for the last month) |
Karnataka
| Salary Per Month (INR) | Tax Amount |
| Up to INR 14,999 | NA |
| INR 15,000+ | INR 200 |
Andhra Pradesh
| Salary Per Month (INR) | Tax Amount |
| Up to INR 15,000 | NA |
| INR 15,001 to INR 20,000 | INR 150 |
| INR 20,000+ | INR 200 |
Tamil Nadu
| Salary Per Month (INR) | Tax Amount |
| Up to INR 3,500 | NA |
| INR 3,5001 to INR 5,000 | INR 22.5 |
| INR 5,001 to INR 7,500 | INR 52.5 |
| INR 7,501 to INR 10,000 | INR 115 |
| INR 10,001 to INR 12,500 | INR 171 |
| Above INR 12,500 | INR 208 |
Telangana
| Salary Per Month (INR) | Tax Amount |
| Up to INR 15,000 | NA |
| INR 15,000 to INR 20,000 | INR 150 |
| INR 20000+ | INR 200 |
Kerala
| Salary Per Month (INR) | Tax Amount |
| Up to INR 1999 | NA |
| INR 3,000 to INR 4,999 | INR 20 |
| INR 3,000 to INR 7,499 | INR 30 |
| INR 5,000 to INR 7,499 | INR 50 |
| INR 7,500 to INR 9,999 | INR 75 |
| INR 10,000 to INR 12,499 | INR 100 |
| INR 12,500 to INR 16,666 | INR 125 |
| INR 16,667 to INR 20,833 | INR 166 |
| INR 20,834+ | INR 208 |
Gujrat
| Salary Per Month (INR) | Tax Amount |
| Up to INR 5,999 | NA |
| INR 6,000 to INR 8,999 | Rs 80 |
| INR 9,000 to INR 11,999 | INR 150 |
| INR 12,000 and above | INR 200 |
Madhya Pradesh
| Salary Per Month (INR) | Tax Amount |
| Up to INR 18,750 | NA |
| INR 18,751 to INR 25,000 | INR 125 |
| INR 25,001 to INR 33,333 | INR 167 |
| INR 33,334 and above | INR 208 for 11 months and INR 212 for the last month |
Odisha
| Salary Per Month (INR) | Tax Amount |
| Up to INR13,304 | NA |
| INR 13,305 to INR 25,000 | INR 125 |
| INR 25,001 and above | INR 200 (for 12 months) and INR 300 (for the last month) |
Exemptions in Professional Tax
While every salaried employee is required to pay professional tax, some individuals are exempted from it. If you happen to belong to any of the below categories then you may not need to pay the professional tax:
- Individuals who are members of the force and are governed by the Army, Navy Act, and Air Force.
- Individuals who are mentally and physically disabled (blindness, deafness, etc.).
- An individual who is a parent of a child living with a disability.
- Individuals who are temporary factory workers (Badli workers).
- Individuals who are owners/operators of educational institutes.
- Foreign employees working for the state.
- Individuals above 65 years of age.
- Women agents in the government’s Mahila Pradhan Kshetriya Bachat Yojana
What is the Professional Tax Limit?
The professional tax was initially implemented in India in 1949 with a maximum amount of Rs. 250. In 1988, this maximum amount was raised to Rs. 2,500 and has remained unchanged since then. Therefore, if you are a salaried individual or a professional earning regular income, your employer or the relevant party can deduct and pay the professional tax from the income you receive.
The rules for registering and paying professional tax remain consistent, regardless of who is making the payment. The payment amount is determined by the nature of your work and the income slab you fall under.
When is Professional Tax Deducted?
If you are an employee receiving a salary, your employer is responsible for deducting professional tax from your gross income every month based on your salary slab. This deduction is mandated by Article 276(2) of the Indian Constitution, and the collected amount is remitted to the respective state government.
As a professional or a business owner, you are required to make professional tax payments according to the applicable slab in the state where you work or where your business is located. This obligation applies to individuals who are professionals, owners of private limited or limited liability partnership companies, partners in partnership firms, or even sole proprietor companies. However, certain exemptions are provided for senior citizens, individuals with disabilities, parents of disabled individuals, or parents of mentally challenged children.
Why is Professional Tax Different for Different People?
Your professional tax obligations are influenced by how you earn a regular income. The tax amount also varies from state to state in India, with some states and union territories not imposing any professional tax at all. Therefore, two factors determine the amount to be deducted from your income as professional tax:
- Your earnings and the income slab you fall into.
- The professional tax slab set by your state.
Professional Tax For Salaried Individuals
The professional tax is calculated based on your gross monthly income and the corresponding income slab in the state where you work. For example, if your gross income is Rs. 30,000 per month and you work in Maharashtra, you would be required to pay Rs. 200 per month (except in February when it would be Rs. 300) as per the professional tax slab set by the state. Usually, your employer deducts this amount from your salary.
Professional Tax For Self-Employed Individuals
If you are not employed by an organization and are self-employed, you are responsible for paying the professional tax on your own. It is crucial to submit your taxes to the state where you work without fail. According to the Professions, Trades, Callings and Employment Act 2000, professionals who earn income through their practice in specialized fields, such as doctors, chartered accountants, medical professionals, technology experts, lawyers, and freelancers, are required to pay professional tax. Freelancers are also included in this category.
All professionals, including freelancers, must apply for a professional tax registration number, which can be obtained by downloading the form from your state’s professional tax website. Once you have a registration number, you can use it to pay your professional tax now and in the future. Some states offer rebates if you pay professional tax in advance based on projected future income. Therefore, it is essential to be aware of the professional tax slabs set by your state.
Professional Tax For Companies
Every company operating in India is obligated to pay a lump sum professional tax based on employee earnings deductions. Additionally, as the owner of the company, you are required to pay professional tax based on your personal income earnings. Both of these tax liabilities can be paid by registering online using the forms available on your state government’s professional tax website.
Where should You Show Professional Tax in ITR?
If you are a salaried individual, you don’t need to worry about declaring professional tax in your Income Tax Return (ITR). Your employer will take care of this process. However, when you receive Form 16 from your employer, make sure to check the “income from salary” section. The amount mentioned in this section should be your gross salary minus any exemptions and professional tax. Additionally, ensure that the details mentioned under Chapter VIA in Part B of Form 16, such as the amount before deduction and other relevant information, are accurate. By cross-checking these variables, you can identify and address any discrepancies if they arise.
On the other hand, if you are filing an ITR as a professional or for your company, you will need to declare your gross income based on the specific ITR form you are using. Along with that, you will also need to mention your professional tax liability for the year, taking into account other factors such as rent, investments, etc. If you have been making monthly or quarterly professional tax payments as a company, provide appropriate documents as proof and include the amount in your ITR.
Difference Between Professional Tax and TDS
| Factor | Professional Tax | TDS |
| Applicability | Professional tax is levied by state governments on individuals earning income from their profession, employment, or business | TDS is deducted from various types of income, such as salary, interest, rent, or professional fees |
| Authority | Professional tax is governed by state governments | TDS is regulated by the Central Board of Direct Taxes (CBDT) under the Income Tax Act. |
| Collection | Professional tax is collected by state governments through employers or directly from self-employed individuals | TDS is deducted at source by the payer of income and remitted to the government. |
| Purpose | Professional tax is primarily aimed at generating revenue for the state government | TDS serves as a mechanism to ensure the collection of income tax in advance. |
| Documentation | Professional tax does not require separate documentation for filing income tax returns | TDS deductions are reported through Form 16 or Form 16A and need to be considered while filing income tax returns. |
In summary, professional tax is a state-level tax on income from professions, employment, or business, while TDS is a deduction made at the source of income to ensure the collection of income tax in advance.
Conclusion
Professional tax is a tax levied on the monthly gross salary of a salaried employee. It is paid to the state government by either the employer or self-employed individuals. Timely submission of this tax is crucial to avoid penalties.
It is important to understand that different states have varying tax slabs, which determine the amount to be paid. Not all earning employees are liable to pay professional tax, as certain exemptions apply. Having a comprehensive understanding of professional tax helps individuals know the deduction amounts and applicable slab rates.
How is professional tax calculated?
Is professional tax applicable in Union Territories?
Do freelance professionals need to pay professional tax?
What should I do if I have queries regarding my professional tax?
Why do professional tax rates differ across states and Union Territories in India?
Why is professional tax not applicable in Union Territories?
Is professional tax mandatory?
Is professional tax deducted monthly in Tamil Nadu?
What is the penalty for not paying Karnataka Professional Tax on time?
What is the salary cap for Karnataka Professional Tax?
When is the due date for Karnataka Professional Tax payment?
Who is exempt from paying professional tax?
