Professional Tax – Obligations, Exemptions, State-Wise Rates

Professional Tax – Obligations, Exemptions, State-Wise Rates

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Rashmi
Rashmi Karan
Manager - Content
Updated on Dec 26, 2023 10:41 IST

If you are a salaried employee, you must be aware of professional tax. These taxes are mentioned in the salary slips and Form 16 issued to professionals along with HRA, conveyance, etc. If you wonder about these taxes and the professional tax rates state-wise, this article will help you. Learn about professional tax, who should pay, exemptions, procedures, state-wise rates, deductions, and violations.

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Content

What is Professional Tax?

Professional Tax is a type of Tax that the respective state governments in India levy on all individuals who make money through different professions, trades, and employment. Every individual who is earning is obligated to pay professional Tax. The calculation and amount collected may differ from one state to another, but it has a limit of Rs. 2500 per year.

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Who Levies Professional Tax?

Professional tax in India is levied by the State Governments. Article 246 of the Constitution of India allocates legislative powers between the Parliament and the State Legislatures. Professional tax falls under the State List (List II) purview as per the Seventh Schedule of the Indian Constitution.

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Professional Tax Applicability

Professional Tax applies to the below individuals and entities:

  • Companies and firms
  • Limited liability partnerships (LLPs) 
  • Corporation
  • Societies
  • Architects
  • Associations
  • Chartered Accountants
  • Clubs
  • Company Secretaries
  • Contractors
  • Engineers
  • Insurance agents
  • Legal practitioners  
  • Management consultants
  • Medical practitioners such as doctors, dentists, physiotherapists, etc.
  • Surveyors
  • Tax consultants

Who Collect And Pays The Professional Tax?

The State Commercial Tax Department collects the professional tax, eventually reaching the municipality corporation fund.

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Individuals Responsible For Pay Professional Tax

  • Employers are responsible to deduct and pay professional tax to the State Government for their employees, subject to the monetary threshold. 
  • An employer (corporates, partnership firms, sole proprietorship, etc.), also being a person carrying on trade/profession, is also required to pay professional tax on his trade/profession again subject to the monetary threshold, if any, provided by respective State’s legislation. 
  • In such a case, the employer must register and obtain a professional tax registration certificate to pay professional tax on his trade/profession and a professional tax enrolment certificate to deduct the tax from his employees and pay. Further, each office may require separate registration depending on the respective State’s legislation.
  • Persons carrying on freelancing businesses without any employees must register themselves subject to the monetary threshold as per the state legislation. 
  • A professional tax levy may be subject to the exemption as per the respective state to specific categories. For example, parents or guardians of blind or someone suffering from mental retardation from the levy of Karnataka Professional tax.

Procedure For Paying Professional Tax

This is, again, a State-specific query. However, a professional tax can be paid either online/offline. Further, professional tax returns must also be filed at specified intervals depending on the State’s requirement.

Exemptions: 

  • Persons suffering from permanent physical disabilities (including blindness).
  • Parents or guardians of someone suffering from mental retardation.
  • Individuals running an educational institute
  • A foreign national employed by the relevant state
  • Any individual above 65 years
  • Women serving as staff under the Government’s Mahila Pradhan Kshetriya Bachat Yojana
  • Persons 65 years and above (60 years in the case of Karnataka).
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Profession Tax Rates in Indian States in 2022-2023

Andhra Pradesh

Monthly Salary Professional Tax Levied PM
Less than Rs. 15,000 Nil
Rs. 15,000 – 20,000 Rs. 150
Rs. 20,000 and above Rs. 200 

Bihar

Monthly Salary Professional Tax Levied PM
Up to Rs. 3,00,000 Nil
Rs. 3,00,001 – 5,00,000 Rs. 1000
Rs. 5,00,001 — 10,00,000 Rs. 2000
Above Rs. 10,00,001 Rs. 2500

Goa 

Monthly Salary Professional Tax Levied PM
Less than Rs. 15,000 Nil
Rs. 15,000 – 25,000 Rs. 150
Rs. 25,001 and above Rs. 200 

Gujarat 

Monthly Salary Professional Tax Levied PM
Up to Rs. 5999 Nil
Rs. 6000 to Rs. 8999 Rs. 80
Rs. 9000 to Rs. 11999 Rs. 150 
Rs 12000 and above Rs. 200

Karnataka

Monthly Salary Professional Tax Levied PM
Up to Rs. 14,999 Nil
Rs. 14,999 and above Rs. 200 

Kerala

Monthly Salary Professional Tax Levied PM
Up to Rs. 11,999 Nil
Rs. 12,000 – 17,999 Rs. 120
Rs. 18,000 – 29,999 Rs. 180
Rs. 30,000 – 44,999 Rs. 300
Rs. 45,000 – 59,999 Rs. 450
Rs. 60,000 – 74,999 Rs. 600
Rs. 75,000 – 99,999 Rs. 750
Rs. 1,00,000 – 1,24,999 Rs. 1000
Rs. 1,25,000 onwards Rs. 1250

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Maharashtra

Monthly Salary Professional Tax Levied PM
Up to Rs. 7,500 Nil (male)
Up to Rs. 10,000 Nil (female)
Rs. 7,500 – 10,000 Rs.200
Rs. 10,000 onwards Nil

Madhya Pradesh

Monthly Salary Professional Tax Levied PM
Up to Rs. 10,000 Nil
Rs. 18,751 – 25,000 Rs. 125
Rs. 25,001 – 33,333 Rs. 167
Rs. 33,334+ First 12 months – Rs. 208
Last month – Rs. 212

Odisha

Monthly Salary Professional Tax Levied PM
Up to Rs. 13,304 Nil
Rs. 13,305 – 25,000 Rs. 125
Rs. 25,001 and above First 12 months – Rs. 200
Last month – Rs. 300

Tamil Nadu

Monthly Salary Professional Tax Levied PM
Up to Rs. 3,500 Nil
Rs. 3,5001 – 5,000 Rs. 22.5
Rs. 5,001 – 7,500 Rs. 52.5
Rs. 7,501 – 10,000 Rs. 115
Rs. 10,001 – 12,500 Rs. 171
Above Rs. 12,500 Rs. 208

Telangana

Monthly Salary Professional Tax Levied PM
Up to Rs. 15,000 Nil
Rs.15,001 – 20,000 Rs. 150
Rs.20,001 onwards Rs.200
Up to 5 years*  Nil
Over 5 years* Rs. 2,500 (per annum)

*For professionals like CS, legal practitioners, CA, architects, etc.

West Bengal

Monthly Salary Professional Tax Levied PM
Up to Rs. 10,000 Nil
Rs. 10,001 – 15,000 Rs. 110
Rs. 15,001 – 25,000 Rs. 130
Rs. 25,001 – 40,000 Rs. 150
Rs. 40,000+ Rs. 200
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Professional Tax Deduction

Under Section 16 of the Income Tax Act of 1961, individuals can claim a deduction for the professional tax paid during the financial year. This deduction is available to both salaried individuals and self-employed professionals.
The professional tax paid can be claimed as a deduction from the income while calculating the taxable income. It is essential to keep records of the professional tax paid, such as receipts or certificates, as proof when filing your income tax return.

Consequences of Professional Tax Regulation Violation 

There is a state-regulated penalty in case of failing to register and file professional tax in time.

For example: In Maharashtra, the penalty for late registration is Rs 5/day. The defaulters will have to pay –

  • An interest of 1.25%/month in case of late payment
  • A 10% penalty on the tax amount for non-payment/delay of professional tax
  • A penalty of Rs. 1000 – 2000 for late return filing

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FAQs - Professional Tax

Who is liable to pay Professional Tax?

Professional Tax is payable by individuals who are employed in professions or trades, business owners, and self-employed professionals, depending on the specific regulations of their respective states.

How is Professional Tax calculated?

Professional Tax is calculated based on a slab system, where the tax amount depends on the income or professional earnings of the individual. Each state has its own rate structure.

Is Professional Tax applicable throughout India?

No, Professional Tax is a state-specific tax, and each state in India has its own Professional Tax Act with different rates and regulations. It is not applicable uniformly across the country.

Are there any exemptions available for Professional Tax?

Yes, exemptions and deductions may be available based on income levels, age, and disability. These exemptions vary from state to state.

How and where do I register for Professional Tax?

You can register for Professional Tax with the local tax authorities in your state. The procedure and documentation required may vary, so checking with your state's tax department is advisable.

When should I file and pay Professional Tax?

The due dates for filing and paying Professional Tax depend on the state's regulations. Typically, it is paid on a monthly or yearly basis. Check with your state's tax department for specific deadlines.

Can I claim a deduction for Professional Tax while filing my income tax return?

Yes, you can claim a deduction for the Professional Tax paid under Section 16 of the Income Tax Act, 1961, while calculating your taxable income.

About the Author
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Rashmi Karan
Manager - Content

Rashmi is a postgraduate in Biotechnology with a flair for research-oriented work and has an experience of over 13 years in content creation and social media handling. She has a diversified writing portfolio and aim... Read Full Bio