What is Professional Tax, How to Calculate?Payment & Tax Slabs

Most working professionals would have noticed a deduction called the professional tax on their pay slips. This deduction is separate from the income tax deduction . The income tax regulations contain an income head called income from business or profession. This professional tax is often confused with the profession as per income tax regulations, but it is entirely different.Though this remains to be a largely unpopular tax as most people don’t know about it, this article will shed complete light on what it is, how it is calculated and who will have to pay it. This tax can be seen on the payslips as well as form 16 of a salaried professional.

Professional tax is a tax levied on all salaried employees, those carrying on a trade or a profession and even freelancers. This tax applies only to those who exceed a certain threshold.Professional Tax is applied by a State Government, so the rules will differ based on which state a company is registered in. On the basis of the level of income, professional tax is deducted from the salary. Any professional tax from a taxpayer cannot exceed Rs. 2,500 every year.The tax falls under the purview of Article 246 of the Indian Constitution. While only the Parliament has exclusive rights to make laws with respect to the Union List (Section 146), Professional Tax is an exception to this rule. Therefore, states can make their own rules with respect to Professional Tax.Professional Tax can be allowed as a deduction from the income tax act which means that it can be reduced from the total taxable income of the taxpayer. It is to be noted that this deduction is typically automatically computed because it is included in Form 16 .

Professional Tax Rates in Maharashtra

Professional Tax Rates in Karnataka

Professional Tax Rates in Tamil Nadu

Professional Tax Rates in Kerala

Professional Tax Rates in West Bengal

Professional Tax Rates in Andhra Pradesh

Professional Tax Rates in Telangana

Professional Tax Rates in Gujarat

Also Read: Presumptive Tax Scheme For Professionals: 5 Things You Should Know

The Commercial Tax Department of each state is responsible for collecting Professional Tax. After being collected by the individual states, the municipal corporation ultimately received it for use.

For salaried professionals, the employer is responsible for deducting and paying the professional tax to the state government. The employer has to compute the threshold and deduct the correct amount of professional tax accordingly.Suppose the corporate organizations, partnership firms or sole proprietor that is an employer also carries out a business, trade or profession that requires professional tax to be deducted. In this case, the employer in question must obtain a professional tax certificate through registration to pay the professional tax on the trade or business. The employer will also have to obtain a professional tax enrolment certificate so that they are allowed to deduct the tax from the employees.Every branch of the employer will have to create a separate registration for each state in which the branch is. If they cross the monetary threshold, those who run a freelance business will have to register themselves. This registration will be in the state in which the business operates.

Here is a list of circumstances in which taxpayers can be exempt from deducting or paying professional tax even if they cross the threshold.

1. If the individual is a member of the defence force (Army, Navy or Air Force).
2. If the individual has a disability (mental or physical).
3. If the individual is the parent or legal guardian of a child with a disability (mental or physical).
4. If the employer is a charitable hospital in a location below the taluka level.
5. If the individual is a temporary factory worker.
6. If the employer is operating an educational institution.
7. If the individual is not a citizen of the country but working in the country.
8. If the individual is above the age of 65 years.
9. If the individual is a female agent employed under the Government’s Mahila Pradhan KshetriyaBachat Yojana or Director of Small Savings.

The form of payment of professional tax may differ from state to state. However, every state has an offline and an online method. It is safest to visit the official website of the state and follow the steps mentioned to register and pay the professional tax as an employer. Typically, the due dates to pay the professional tax may be monthly or quarterly or even yearly, depending on the state. Also Read: Avoid The 5 Common Mistakes While Planning Tax Savings For A Secure Tomorrow

Every state can decide their legislative procedures around the non-payment or non-registration, or late payment of professional tax by an employer. In Maharashtra, late registration after the professional tax becomes applicable is Rs. 5 per day. A delay in payment attracts a 1.25% interest per month and a penalty of 10% on the professional tax due if there is a delay in payment of professional tax to the state government. A penalty between Rs. 1,000 to Rs. 2,000 is applicable for delay in the submission of returns related to professional taxIn Karnataka, delay in payment of professional tax attracts an interest of 1.25% per month. The maximum penalty can be 50% of the amount of professional tax that was not paid to the state government.Ready to make the most of your money? Start your tax planning journey now!