What is Professional Tax | Calculation | Deduction & Tax Rates

Professional tax is a type of direct tax that is levied on those who earn money from their jobs, professions, or trading. A lawyer, teacher, doctor, chartered accountant, and other practicing professionals are examples of practicing professionals. Employers deduct the tax from the employee’s monthly salary, which is then deposited with the state governments. Apart from salaried employees, professionals pay it directly to the government.

What is Professional Tax

The term “professional tax” may be one of those that does not entirely reflect the true meaning of the term. It is not, according to its name, a tax imposed solely on professionals. It’s a tax placed on all kinds of professions, trades, and employment, and it’s based on the income generated by those professions, trades, and jobs. It is imposed on employees, self-employed individuals, freelancers, professionals, and those who earn more than the monetary level.

Professional Tax

According to Article 246 of the Indian Constitution, only Parliament has the authority to create laws relating to the Union List, which includes income taxes. Only the Concurrent and State lists give the state the authority to enact legislation. Professional tax is a deductible payment under the Income Tax Act of 1961, and it can be deducted from taxable income. Professional tax, on the other hand, is a type of income tax levied by the state government (not all states in the country chose to levy professional tax). Despite being an income tax, the State Government is also entitled to pass legislation regarding professional tax under Article 276 of the Indian Constitution, which deals with taxes on professions, trades, callings, and employment.

Professional Tax Payment Procedure & Need to File Tax Return

This is an inquiry that is specific to a specific state. A professional tax, on the other hand, can be paid online or offline in most cases. Professional tax returns must also be filed at predetermined periods, depending on the requirements of the state.

In-Charge of Collecting & Paying Professional Tax

The Commercial Tax Department is in charge of collecting professional tax. It is collected by the individual states’ commercial tax departments, and it eventually ends up in the municipal corporation’s treasury. Those who are accountable for paying professional taxes are:

An employer (corporations, partnership businesses, sole proprietorships, and so on) who is also a person carrying on a trade or profession is obligated to pay professional tax on that trade or profession, subject to any monetary thresholds set by the individual State’s legislation. To pay professional tax on his trade/profession and deduct the tax from his employees, the employer must register and get both a professional tax registration certificate and a professional tax enrolment certificate. Furthermore, depending on the legislation in each state, separate registration for each office may be required.

When it comes to employees, an employer is responsible for deducting and paying professional tax to the state government, subject to any monetary restrictions set by the state statute.

Tax Saving Rules

Professional Taxation in India

The state government levies a distinct kind of professional tax in each state. Article 276 of the Constitution, which authorizes the State Government to levy professional tax, establishes a maximum threshold of Rs 2,500 above which no professional tax can be levied All state has its own set of laws and regulations that govern the state’s professional tax. To pay professional tax, however, all states use a slab system depending on income.

Examples:

Andhra Pradesh’s Professional Tax Rate
  • If the monthly salary or wage in Andhra Pradesh’sup to Rs 15,000  then Andhra Pradesh’sprofessional tax rate will be NIL.
  • If the monthly salary or wage in Andhra Pradesh is between Rs 15,001 to Rs 20,000 then Andhra Pradesh’sprofessional tax rate will be Rs 150 per month.
  • If the monthly salary or wage in Andhra Pradesh is greater than Rs 20,000            then Andhra Pradesh’sprofessional tax rate will be Rs 200 per month.
Karnataka’s Professional Tax Rate
  • If the Monthly salary or wage in Karnataka is up to Rs 15,000 then Karnataka’s professional tax rate will be NIL.
  • If the Monthly salary or wage in Karnataka is greater than Rs 15,000         then Karnataka’s professional tax rate will be Rs 200 per month.

States where Professional Tax Rate is Applicable

The list of states where the Professional Tax rate is applicable are given in the table below:

StatePeriod of deductionIncome slabsTax amount
 Andhra PradeshMonthlyUp to Rs 15,000Nil
Rs 15,001 to Rs 20,000Rs 150
More than Rs 20,000Rs 200
 AssamMonthlyUp to Rs 10,000Nil
Rs 10,001 to Rs 15,000Rs 150
Rs 15,001 to Rs 25,000Rs 180
More than Rs 25,000Rs 208
 BiharYearlyUp to Rs 3 lakhNil
Between Rs 3 lakh to Rs 5 lakhRs 1,000
Between Rs 5 lakh to Rs 10 lakhRs 2,000
Above Rs 10 lakhRs 2,500
 JharkhandYearlyUp to Rs 3 lakhNil
Between Rs 3 lakh to Rs 5 lakhRs 1,200
Between Rs 5 lakh to Rs 8 lakhRs 1,800
Between Rs 8 lakh to Rs 10 lakhRs 2,100
Above Rs 10 lakhRs 2,500
 GujaratMonthlyUp to Rs 5999Nil
Rs 6000 to Rs 8999Rs 80
Rs 9000 to Rs 11999Rs 150
More than Rs 12000Rs 200
 KarnatakaMonthlyUp to Rs 15,000Nil
Above Rs 15,000Rs 200
 KeralaHalf-yearlyUp to Rs 11,999Nil
Rs 12,000 to Rs 17,999Rs 120
Rs 18,000 to Rs 29,999Rs 180
Rs 30,000 to Rs 44,999Rs 300
Rs 45,000 to Rs 59,999Rs 450
Rs 60,000 to Rs 74,999Rs 600
Rs 75,000 to Rs 99,999Rs 750
Rs 1,00,000 to Rs 1,24,999Rs 1,000
Above Rs 1,25,000Rs 1,250
 Madhya PradeshMonthlyUp to Rs 2,25,000Nil
Between Rs 2,25,001 to Rs 3,00,000Rs 1,500 (Rs 125 Per Month)
Between Rs 3,00,001 to Rs 4,00,000Rs 2,000 (Rs 166 Per Month For 11 Months And Rs 174 For 12th Month)
Above Rs 4,00,001Rs 2,500 (Rs 208 Per Month For 11 Months And Rs 212 For 12th Month)
 MaharashtraMonthlyUp to Rs 7,500Nil
Between Rs 7,501 to Rs 10,000Rs 175 (Nil for women)
Above Rs 10,000Rs 200
Rs 300 (Employer has to deduct in the February month only)
 ManipurYearlyUp to Rs 50,000Nil
Rs 50,000 onwards to Rs 75,000Rs 1,200
Rs 75,000 onwards to Rs 1,00,000Rs 2,000
Rs 1,00,000 onwards to Rs 1,25,000Rs 2,400
Above Rs 1,25,000Rs 2,500
 MeghalayaYearlyUp to Rs 50,000Nil
Between Rs 50,001 to Rs 75,000Rs 200
Between Rs 75,001 to Rs 1,00,000Rs 300
Between Rs 1,00,001 to Rs 1,50,000Rs 500
Between Rs 1,50,001 to Rs 2,00,000Rs 750
Between Rs 2,00,001 to Rs 2,50,000Rs 1,000
Between Rs 2,50,001 to Rs 3,00,000Rs 1,250
Between Rs 3,00,001 to Rs 3,50,000Rs 1,500
Between Rs 3,50,001 to Rs 4,00,000Rs 1,800
Between Rs 4,00,001 to Rs 4,50,000Rs 2,100
Between Rs 4,50,001 to Rs 5,00,000Rs 2,400
Above Rs 5,00,001Rs 2,500
 MizoramMonthlyUp toRs 5,000Nil
Between Rs 5,001 to Rs 8,000Rs 75 (Assessee may pay in lump sum Rs 900 per annum)
Between Rs 8,001 to Rs 10,000Rs 120 (Assessee may pay in lump sum Rs 1440 per annum)
Between Rs 10,001 to Rs 12,000Rs 150 (Assessee may pay in lump sum Rs 1800 per annum)
Between Rs 12,001 to Rs 15,000Rs 180 (Assessee may pay in lump sum Rs 2160 per annum)
Above Rs 15,001Rs 208 (Assessee may pay in lump sum Rs 2500 per annum)
 NagalandMonthlyUp to Rs 4,000Nil
Between Rs 4,001 to Rs 5,000Rs 35
Between Rs 5,001 to Rs 7,000Rs 75
Between Rs 7,001 to Rs 9,000Rs 110
Between Rs 9,001 to Rs 12,000Rs 180
Above Rs 12,001Rs 208
 OdishaYearlyUp to Rs 1,60,000Nil
Between Rs 1,60,001 to Rs 3,00,000Rs 1,500
Above Rs 3,00,001Rs 2,500
 PuducherryYearlyUp to Rs 99,999Nil
Between Rs 1,00,000 to Rs 2,00,000Rs 250
Between Rs 2,00,001 to Rs 3,00,000Rs 500
Between Rs 3,00,001 to Rs 4,00,000Rs 750
Between Rs 4,00,001 to Rs 5,00,000Rs 1,000
Above Rs 5,00,001Rs 1,250
 PunjabMonthlyAbove Rs 2,50,000Rs 200
 SikkimMonthlyUp to Rs 20,000Nil
Between Rs 20,001 to Rs 30,000Rs 125
Between Rs 30,001 to Rs 40,000Rs 150
Above Rs 40,000Rs 200
 Tamil NaduMonthlyUp to Rs 21,000Nil
Between Rs 21,001 to Rs 30,000Rs 135
Between Rs 30,000 to Rs 45,000Rs 315
Between Rs 45,001 to Rs 60,000Rs 690
Between Rs 60,001 to Rs 75,000Rs 1,025
Above Rs 75,000Rs 1,250
 TelanganaMonthlyUp to Rs 15,000Nil
Between Rs 15,001 to Rs 20,000Rs 150
Above Rs 20,001Rs 200
 TripuraYearlyUp to Rs 7,500Nil
Between Rs 7,501 to Rs 15,000Rs 1,800
Above Rs 15,001Rs 2,496
 West BengalMonthlyUp to Rs 10,000Nil
Between Rs 10,001 to Rs 15,000Rs 110
Between Rs 15,001 to Rs 25,000Rs 130
Between Rs 25,001 to Rs 40,000Rs 150
Above Rs 40,000Rs 200

File ITR Online 

States where Professional Tax Rate is Not Applicable

S. NoState
 1Arunachal Pradesh
 2Delhi
 3Himachal Pradesh
 4Uttar Pradesh
 5Andaman and Nicobar Islands
 6Punjab
 7Uttarakhand
 8Goa
 9Jammu & Kashmir
 10Ladakh
 11Rajasthan
 12Haryana
 13Dadra and Nagar Haveli
 14Lakshadweep

Professional Tax Regulation Penalty

While the actual amount of penalty or penal interest may depend on the respective State’s legislation, a penalty may be levied by all such states for not registering once professional tax o77 legislation becomes applicable. Moreover, there are also penalties for not making the payment within the due date and also failing to file the return within the specified due date.

Example:

In Maharashtra, a penalty of Rs 5 per day is applied for late registration, the interest of 1.25 percent per month for late payment, a penalty of 10% of the amount of tax in case of late/non-payment of professional tax, and a penalty of Rs 1000 – Rs 2000 for late submission of the return.

FAQ’s

I’m a self-employed professional. Is it necessary for me to pay Professional Tax?

Yes, Professional Tax applies to professionals whose income above the stipulated limit as outlined in your state’s Professional Tax Laws.

Is it necessary to file a tax return?

Yes, Professional tax returns must be filed at predetermined periods, depending on the requirements of the state.

What is the method of calculating Professional Tax?

Professional income tax is calculated using predetermined slabs based on monthly or annual earnings. In India, these slabs differ from state to state. It is usually Rs 200 every month, provided that the total PT for the financial year does not exceed Rs 2,500.

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