Professional tax is a direct tax levied on persons earning an income by either practicing a profession, employment, calling, or trade. Unlike income tax imposed by the Central Government, professional tax is levied by the government of a state or union territory in India. In the case of salaried and wage earners, the professional tax is liable to be deducted by the Employer from the salary/wages, and the same is to be deposited to the state government. In the case of other classes of individuals, this tax is liable to be paid by the employee himself. The tax calculation and amount collected may vary from one State to another, but it has a maximum limit of Rs. 2500/- per year.

Professional Tax Applicability

This tax is levied on all kinds of professions, trades, and employment. Profession tax is applicable to the following classes of persons:

• An Individual
• A Hindu Undivided Family (HUF)
• A Company/Firm/Co-operative Society/Association of persons or a body of individuals, whether incorporated or not

The professionals earning an income from salary or other practices such as a lawyer, teachers, doctors, chartered accountants, etc. are required to pay professional tax.

Professional Tax Applicable States Across India

Professional tax is applicable in the following states and union territories of India:

• Andhra Pradesh
• Assam
• Bihar
• Gujarat
• Jharkhand
• Karnataka
• Kerala
• Madhya Pradesh
• Maharashtra
• Manipur
• Meghalaya
• Mizoram
• Nagaland
• Odisha
• Pondicherry
• Punjab
• Sikkim
• Tamil Nadu
• Telangana
• Tripura
• West Bengal

Professional Tax Rate

The maximum amount payable per annum towards professional tax is INR 2,500. The professional tax is usually a slab amount based on the gross income of the professional. It is deducted from his income every month.

The Commercial Taxes Department of a state/union territory is the nodal agency that collects professional tax on the basis of predetermined tax slabs which vary for each state and union territory. The tax is calculated on the annual taxable income of the individual; however, it can be paid either annually or monthly.

Who Pays Profession Tax?

In the case of Salaried and Wage-earners, the Professional Tax is liable to be deducted by the Employer from the Salary/Wages, and the Employer is liable to deposit the same with the state government.

Self-employed persons who carry out their profession or trade on their own and fall in the ambit of profession tax are liable to pay the tax themselves to the state government.

Employer’s Responsibility For Professional Tax

The owner of a business is responsible for deducting professional tax from the salaries of his employees and paying the amount so collected to the appropriate government department. He/she has to furnish a return to the tax department in the prescribed form within the specified time. The return should include proof of tax payment. In case of not enclosing the payment proof, the register will consider the return incomplete and invalid.

Exemptions For Payment Of Professional Tax

There are exemptions provided for certain individuals to pay Professional Tax under the Professional Tax Rules. The following individuals are exempted to pay Professional Tax:

• Parents of children with permanent disability or mental disability: These parents are exempt from paying professional tax due to the additional expenses and financial burden they face in caring for their children.

• Members of the forces: This exemption is provided to individuals who serve in the Indian Army, Air Force, or Navy, including auxiliary forces or reservists serving in the state.

• Badli workers in the textile industry: Badli workers are temporary employees who work on an as-needed basis and are not entitled to certain benefits, including payment of professional tax.

• Individuals with permanent physical disabilities: This exemption is provided to individuals with permanent physical disabilities, including blindness, who face additional expenses in managing their daily lives.

• Women exclusively engaged as: Women who are exclusively engaged in certain professions, such as housewives or homemakers, are exempt from paying professional tax due to the lack of regular income.