How to Calculate Professional Tax on Salary?

If you’re a salaried employee, you’ve probably come across the term ‘professional tax’ on your payslips or Form 16. But do you really know what it is and why it’s deducted from your salary? Let’s shed some light on the subject and explore whether it only affects the salaried class.

What Is Professional Tax?

Professional tax is a tax imposed on various professions, trades, and employment based on their income levels. It applies to employees, freelancers, professionals, and business owners whose income exceeds a specific threshold set by each state.

This tax is directly deducted from your gross salary by your employer, as it is levied and collected by the state government. The maximum amount charged is Rs 2,500, but the specific rates and slabs can vary from state to state.

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How to Calculate Professional Tax on Salary?

The calculation of Professional Tax (PT) on salary varies by state in India. Here’s a general overview and steps:

1. Check State-Specific Applicability: Professional Tax (PT) is levied by state governments. Determine if your state imposes PT and if you fall under its purview.
2. Understand Tax Slabs: Each state has its own tax slabs based on monthly income. Find the relevant slab for your salary.
3. Calculate Tax Amount: Apply the corresponding tax rate to your monthly income within the applicable slab.
4. Consider Exemptions: Check if you qualify for any exemptions based on factors like age, income, or profession.
5. Deduct Tax Monthly: PT is typically deducted monthly from your salary by your employer.
6. Consult Resources: Refer to your state’s official tax website or consult a tax professional for accurate and up-to-date information.

Example:
If you are working in Maharashtra and earning Rs. 25,000 a month, a professional tax will be deducted of Rs. 200 per month for 11 months and Rs. 300 for the 12th month.

Why Does Professional Tax Differ Across States?

Professional tax differs from state to state because it is governed by each state’s individual laws and regulations. However, all states generally follow a slab system based on income levels to levy this tax. The Constitution (Article 276) empowers state governments to collect professional tax, but it also sets a maximum cap of Rs 2,500 that cannot be exceeded.

Professional Tax Slab Rate & Deadline: State-Wise Rules

In this section, we’ll take a closer look at the states that collect professional tax. We’ll cover the different tax rates and the deadlines for making payments in each state.

1. Professional Tax in Andhra Pradesh

Tax Deduction Period: Monthly

2. Professional Tax in Gujarat

Tax Deduction Period: Monthly

Deadline for Paying Tax

The deadline for paying professional tax depends on when you receive your enrolment certificate. If you got your certificate before the start of the year or by August 31st, you need to pay the tax by September 30th of that same year. However, if you enrolled after August 31st, you have one month from your enrollment date to make your payment for that year.

3. Professional Tax in Karnataka

Tax Deduction Period: Monthly

Deadline for Paying Taxes

In Karnataka, all employers need to make sure they pay their taxes by the 20th of the following month. If they miss this deadline, the state government has the right to impose a fine that can be as much as 50% of the total amount owed. It’s important for employers to stay on top of these deadlines to avoid extra costs.

4. Professional Tax in Kerala

Tax Deduction Period: Every six months

Deadline for Paying Professional Tax

In Kerala, professional tax is paid twice a year. The tax for the first half of the year, covering April to September, must be settled by August 31. For the second half, which runs from October to March, the payment is due by the end of February.

If employers fail to pay the professional tax on time, they can face a fine of up to ₹5,000. Additionally, for any late payments, there’s a penalty of 1% per month on the outstanding amount. It’s important for employers to stay on top of these deadlines to avoid fines and penalties.

Professional Tax in Madhya Pradesh

Tax Deduction Period: Monthly

In Madhya Pradesh, professional tax is deducted from employees’ salaries based on their monthly earnings.

For those earning between Rs. 25,001 and Rs. 33,333, Rs. 166 is taken out of their pay for the first 11 months. In the final month, the deduction increases slightly to Rs. 174.

If an employee’s monthly income exceeds Rs. 33,334, the amount deducted is Rs. 208 for the first 11 months and Rs. 212 in the last month.

It’s important for employees to keep track of these deductions to understand how they affect their overall take-home pay.

Deadline for Paying Taxes

If an employer registers before the start of the year or by August 31, they need to make their tax payment by September 30 each year. For employers who register after August 31, the payment is due within 30 days of their registration date.

If payments are delayed, the tax authority may charge a fee of 2% each month on the total tax amount owed by the employer.

6. Professional Tax in Maharashtra

Tax Deduction Period: Monthly

Exemption: Females earning a salary up to Rs.10,000 are exempt from professional tax.

For employees who earn more than Rs. 10,001, a professional tax of Rs. 200 will be deducted each month for the first 11 months, and then Rs. 300 will be taken from their pay in the final month.

As for businesses, those that registered before the start of the year or by May 31 must pay their taxes for that year by June 30. If a business enrolls after May 31, they need to make their payment within 30 days of signing up.

Keep in mind that if payments are late, there will be a penalty of 10% on the total amount owed.

7. Professional Tax in Tamil Nadu

Tax Deduction Period: Every six months

Deadline for Paying Taxes

If you pay salaries between April and September, you need to submit the professional tax by September 30. For salaries paid from October to March, the deadline is March 31. If you miss these deadlines, you’ll face a fine of 2% on the total amount due.

8. Professional Tax in West Bengal

Tax Deduction Period: Monthly

Deadline for Paying Tax

In West Bengal, employers need to pay professional tax once a year. The payment must be made on or before July 31st of that same financial year. If the payment is late, a penalty of 1% on the amount owed will apply.

Who Is Responsible for Paying Professional Taxes?

In the case of employees, the employer is responsible for deducting and paying professional tax to the state government, provided the employee’s income exceeds the specified threshold. Additionally, employers themselves, whether corporate entities, partnerships, or sole proprietorships, also need to pay professional tax on their businesses.

Freelancers who have no employees are also required to register and pay professional tax if their income exceeds the specified threshold. However, there are exemptions provided by some states for certain categories, such as parents or guardians of individuals with mental retardation.

Who Is Exempt from Professional Tax Deduction?

Several categories of individuals are exempt from a professional tax deduction, including:

• Members of the armed forces (army, air force, navy, and auxiliary/reserve members)
• Defence-related factory workers
• Badli workers in the textile industry
• Individuals with permanent physical disabilities like blindness
• Parents/guardians of people with physical or mental disabilities
• Women under the MPKBY small savings scheme, and individuals above the age of 65.

How to Pay Professional Tax Online?

Making professional tax payments is convenient and can often be done online. Each state has its own official website for e-payment of professional tax.

To pay online, follow these general steps:

• Locate the official state website for professional tax e-payment.
• Select the relevant option for self-employed professionals or registered employers.
• Enter your Professional Tax Registration Number and company/firm details (if applicable).
• Choose the payment period (monthly, annually, or as per departmental demand).
• Specify the year and month for which you are paying tax.
• Enter the tax amount and any applicable penalty.
• Provide bank details for payment and your mobile number for verification.
• Submit the payment and save the payment challan for future reference.

What Happens if Professional Tax Is Not Paid?

Failure to pay professional tax or register for it can result in penalties, which vary depending on the state’s legislation. Late registration can incur a daily penalty, while late payment may be subject to monthly interest. Non-payment or delayed payment of professional tax may also lead to additional penalties, making timely compliance crucial to avoid financial repercussions.

For example, in Maharashtra, the penalty for late registration is Rs 5 per day, with 1.25% monthly interest on late payments and a 10% penalty on the tax amount for non-payment or delay. Late return submissions may also attract a penalty of Rs. 1,000-2,000. Staying informed and fulfilling your professional tax obligations is essential to ensure a smooth and compliant financial journey.

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