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.
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.
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.
State | Monthly Income | Tax Rate |
Andhra Pradesh | Less than Rs. 15,000 | Nil |
Rs. 15,000 to less than Rs. 20,000 | Rs. 150 | |
Rs. 20,000 and above | Rs. 200 | |
Gujarat | Up to Rs. 5,999 | Nil |
Rs. 6,000 to Rs. 8,999 | Rs. 80 | |
Rs. 9,000 to Rs. 11,999 | Rs. 150 | |
Rs. 12,000 and above | Rs. 200 | |
Karnataka | Up to Rs. 15,000 | Nil |
Rs. 15,001 onwards | Rs. 200 | |
Kerala | Up to Rs. 11,999 | Nil |
Rs. 12,000 to Rs. 17,999 | Rs. 120 | |
Rs. 18,000 to Rs. 29,999 | Rs. 180 | |
Rs. 30,000 to Rs. 44,999 | Rs. 300 | |
Rs. 45,000 to Rs. 59,999 | Rs. 450 | |
Rs. 60,000 to Rs. 74,999 | Rs. 600 | |
Rs. 75,000 to Rs. 99,999 | Rs. 750 | |
Rs. 1,00,000 to Rs. 1,24,999 | Rs. 1000 | |
Rs. 1,25,000 onwards | Rs. 1250 | |
Maharashtra | Up to Rs. 7,500 (male) | Nil |
Up to Rs. 10,000 (female) | Nil | |
Rs. 7,500 to Rs. 10,000 (male) | Rs. 175 | |
Rs. 10,000 onwards (male) | Rs. 200 for 11 months + Rs. 300 for 12th month | |
Telangana | Up to Rs. 15,000 | Nil |
Rs. 15,001 to Rs. 20,000 | Rs. 150 | |
Rs. 20,001 onwards | Rs. 200 | |
Up to 5 years (Professionals) | Nil | |
Over 5 years (Professionals) | Rs. 2,500 (per annum) | |
West Bengal | Up to Rs. 10,000 | Nil |
Rs. 10,001 to Rs. 15,000 | Rs. 110 | |
Rs. 15,001 to Rs. 25,000 | Rs. 130 | |
Rs. 25,001 to Rs. 40,000 | Rs. 150 | |
Rs. 40,001 and above | Rs. 200 |
Your professional tax is calculated monthly based on your gross salary for that particular month. The tax is levied on the portion of your income after deducting items like EPF contributions, gratuity, leave deductions, or any past loans taken from your employer. This means that as your gross salary fluctuates, your professional tax amount will also vary accordingly.
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.
Several categories of individuals are exempt from a professional tax deduction, including:
The Commercial Tax Department of each state is responsible for collecting professional tax, and the funds collected go to the respective municipal corporations.
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:
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.
Andaman and Nicobar Islands, Arunachal Pradesh, Chandigarh, Chhattisgarh, Dadra and Nagar Haveli, Daman and Diu, Delhi, Goa, Haryana, Himachal Pradesh, Jammu and Kashmir (prior to the reorganization), Ladakh (prior to the reorganization), Lakshadweep, Rajasthan, and Uttar Pradesh
Andhra Pradesh, Assam, Bihar, Gujarat, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Puducherry, Punjab, Sikkim, Tamil Nadu, Telangana, Tripura and West Bengal
Yes, professional tax is deducted every month.
No, once professional tax is deducted, it is not eligible for a refund.
Yes, professional tax applies to freelancers as well.
Professional tax is a state-levied tax, not imposed by the central government. The mode of payment may vary from State to State.
In general, you can pay professional tax through both online and offline modes. Visit the official website of your relevant state for professional tax payments. For instance, if you reside in West Bengal, you need to log in to their official website: http://wbprofessiontax.gov.in/
Yes, professional tax is mandatory for salaried individuals, i.e., those who receive a regular salary for their work.
Professional tax is considered a deductible amount for the purpose of the Income Tax Act of 1961 and can be deducted from taxable income.