What is Professional Tax?

Introduction

Anyone earning a fixed income such as a salary is liable to pay professional tax. However, this only applies to those who fall under the taxable slabs. Since it is a state-authorized tax, it varies from city to city. To begin with, let's understand the professional tax meaning and the answer to what is professional tax in salary slips.

What is Professional Tax? 

The professional tax definition applies to those earning through a consistent traditional medium or source. People often confuse professional tax and assume it applies explicitly to doctors, lawyers, or people holding a professional hierarchy. However, it applies to all earning individuals. 

As the professional tax falls under the state government, the slab based on which the tax would is levied and decided by the same authority. A few states and union territories do not charge professional tax. Some sectors and incomes fall under different taxes and are exempt from professional tax. 

The state government's slab helps ascertain any individual's professional tax amount. The annual tax amount is further divided into 12 equal parts. Each part is supposed to be deducted from the monthly income. The annual professional tax cap is Rs. 2500. 

For example, Asiya receives a 1.2 lakh rupee salary annually. Depending on the state, the taxable income is Rs. 2,500 per year. The monthly taxable amount would be Rs. 208. Therefore, Asoya would receive a salary of Rs. 9,792 per month. 
 

Profession Tax Rates in the Key States of India 

Since professional tax is the responsibility of the state government, the tax slabs vary from state to state. These are the tax slabs of key states in India. 

Maharashtra  

Karnataka 

West Bengal 

Madhya Pradesh  

Tamil Nadu   

Andhra Pradesh

Gujarat

Odisha

Uttar Pradesh 

Who pays the professional tax? 

People who are earning through a consistent source, self-generated or dependent, are liable to pay professional tax. The Commercial Tax department of the Union Territory or State collects the tax based on the slabs decided by the state government. The tax is ideally deducted from the monthly income. However, taxpayers can also pay a professional tax annually. In addition, self-employed individuals need to collect a Certificate of Employment from the respective state. 

For salaried individuals, the company or firm they work for needs to get a Certificate of Registration. Then, the employer should deduct the monthly tax amount from the employee and submit it to the government. 

There are online and offline modes available for filing professional taxes. In addition, the official websites of the respective states have complete information about professional tax provisions. 
 

The major Indian States and Union Territories Which Do Not Levy Professional Tax

 States and union territories have the option of not imposing a professional tax on citizens. The states and union territories listed below do not apply to professional tax. 

●    Jammu 
●    Kashmir 
●    Himachal Pradesh 
●    Punjab 
●    Uttrakhand 
●    Haryana 
●    Delhi 
●    Rajasthan 
●    Uttar Pradesh 
 

Maximum Professional Tax Amount 

The maximum amount levied on an individual for any state or union territory is Rs. 2500 annually. People on the exemption list can apply through the official website of the respective state. 
 

Exemption from Professional Tax 

Professional tax is subject to the exemption. Here are the exempt categories:

●    Force Member (governed by the Army, Air Force, and Navy Act).
●    A person who is physically or mentally disabled. Disabilities can include blindness, hearing loss, etc.
●    Parent of an individual with a disability.
●    Areas that are below the taluk level, such as charitable hospitals.
●    Badli workers employed in factories (temporary workers).
●    An individual in charge of a school.
●    A foreign national who has worked for the concerned state.
●    Anyone over the age of 65.
●    Women are employed solely as agents under the government's Mahila Pradhan Kshetriya Bachat Yojana.