What is Professional Tax?

Professional Tax is for all whether they are self-employed, salaried or into trading and not just in professions like of a Doctor or a Chartered Accountant. This tax is levied on a basis of the income earned by a person on and above a given income threshold. The tax rate varies from one state of the country to another and there are also various states which do not have any Professional Tax.


Tax Rates in the Different States

Professional Tax or Profession Tax is levied by the State Government on the income of the assessee. Under Article 276 of the Indian Constitution, the state governments are empowered to decide the rate for the professional tax in the state. The maximum amount that can be charged under this tax regime is Rs. 2500. In a few states, this tax is even levied on the basis of source of income.

Every state has their own slabs for this tax and here is a glimpse of the same –
Maharashtra
For Men Nil up to Rs. 7500 
From Rs. 7500 – Rs. 10000 Rs. 175
For Women  Nil up to Rs. 10000
For all Above Rs. 10000 Rs. 200 and Rs. 300 for the month of February 
West Bengal
Up to Rs. 8500 Nil
From Rs. 8501 – Rs. 10000 Rs. 90
From Rs. 10001 – Rs. 15000 Rs. 110
From Rs. 15001 – Rs. 25000 Rs. 130
From Rs. 25001 – Rs. 40000 Rs. 150
Over and Above Rs. 40000 Rs. 200
Andhra Pradesh
Up to Rs. 15000 Nil
From Rs. 15001 – Rs. 20000 Rs. 150
Above Rs. 20000 Rs. 200
Tamil Nadu
Up to Rs. 21000 Nil
From Rs. 21001 – Rs. 30000 Rs. 100
From 30001 – Rs. 45000 Rs. 235
From Rs. 40001 – Rs. 60000 Rs. 510
From Rs. 60001 – Rs. 75000 Rs. 760
From Rs. 75001 and above  Rs. 1095

Similarly, there are different slabs and rates for the other states as well. For the month of February, the Professional Tax is a little higher than the rest of the eleven months in the year.


Who pays Professional Tax?

If you are in the salaried profession, you have to pay professional Tax, if you are self-employed, you pay this tax, if you are Doctor, Engineer, Chartered Accounts – Professionals, and you have to pay this tax. If you are running a business which is your source of income, you have to pay this tax. So, if your income crosses the threshold mentioned by the states, you are liable to pay the professional tax.


Who Collects Professional Tax?

For a salaried employee, the tax is first collected by the employer from the employee by deducting the same from the salary. Then it is deposited with the Commercial Tax Department. The Commercial Tax Department collects all the Professional Tax in the states where it is applicable and then the fund is sent to the municipal corporation.


Payment Procedure

The payment procedure of the Professional Tax varies according to the states again. Each state government has its own website and you can pay the tax online. Here are different ways you can do it.

  • You can use the Profession Tax Enrolment Number which is of 12 Digit (numeric) to pay the tax.
  • You can also do it by using your Tax Registration Number
  • Tax Government ID of 12 digit
  • Vat Number

After you submit the details and process the payment, you can check the status of your payment as well on the website.


Penalties for violating Professional Tax regulation

The penalties for not registering for Professional Tax or not paying the same within the due date every month varies as per the state in the country again. However, generally, for non-registration, a penalty of Rs. 5 per day is levied. If you pay after the due date then you are charged 10% extra on the amount of professional tax as the penalty.


Summary

Professional Tax is levied your income if it crosses the minimum mark set by each of the states who have professional tax in their tax regime. It is directly deducted from the salary of the salaried employed if their employers are registered with the State Legislation. For the others who are into the different profession of any nature are liable to pay professional tax as per the different slabs/ rates prevailing in the state. The Commercial Tax Department collects this tax and disburse to the municipal corporation for their funds. You can pay this tax online by using your Tax registration number or the ID and other details on their websites. If you do register or missed paying the tax on time, there are certain penalties on the same.

Frequently Asked Questions

Q- Is Professional Tax Mandatory?

If you are a salaried person, then paying Professional Tax is mandatory.


Q- Why the professional tax is different in a different state?

It varies because it is decided by the government of the State and not by the central Government. Every state decides the slabs according to their perspective.


Q- Is their Professional Tax in Union Territories?

No, if you are from a Union Territory of India, you do not need to pay any Professional Tax. This is because of the fact that in a Union Territory the level of income is lower than any state.

Q- Is there any kind of exemptions?

Yes, there is certain exemption which can be availed and these exemptions also vary from state to state. Some of the crucial exemptions are –

  • The parents of a person who is mentally ill or retarded are not liable to pay Professional Tax. This is also applicable for the people who have a serious physical disability.
  • People with a disability for life.
  • People who are from the army, navy or air force. People with related jobs like reservists, auxiliary forces are also exempted from paying this tax.
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.