Professional tax in India is a state-level tax imposed on income earned by way of profession, trade, or employment. It is one of the crucial statutory deductions made by employers and paid to the respective state government. Though not uniform across India, professional tax is mandatory in several states and Union Territories.
What is Professional Tax?
Professional tax is levied by state governments under the authority of the Constitution of India (Article 276). It is applicable to both salaried employees and professionals like doctors, lawyers, chartered accountants, and freelancers. The maximum amount chargeable per annum is ₹2,500.
Applicability Across India
Not all states impose professional tax. It is applicable in states such as Maharashtra, Karnataka, West Bengal, Tamil Nadu, Gujarat, Andhra Pradesh, and Telangana, among others. States like Delhi and Uttar Pradesh currently do not levy this tax.
Employers are responsible for deducting professional tax from salaries every month and depositing it with the state government. Self-employed individuals must register and pay it directly.
Who Needs to Register?
There are two types of registrations:
Professional Tax Employer Registration: For businesses and organizations to deduct and deposit tax on behalf of their employees.
Professional Tax Practitioner Registration: For self-employed professionals liable to pay tax on their income.
Every person earning income through salary or practicing any profession is liable to register under the respective state's Professional Tax Act.
Calculation and Slabs
Each state defines its own slab based on income. For example:
Maharashtra: ₹200 per month for employees earning above ₹10,000.
West Bengal: ₹150 to ₹200 per month based on salary slabs.
Karnataka: ₹200 per month for those earning more than ₹15,000.
It is essential to check the specific state rules for precise slab details.
Filing Procedures
Monthly Deduction: Employers must deduct tax monthly based on the applicable slab.
Payment Due Dates: Generally by the 15th of every month, though quarterly or annual payment options exist in some states.
Returns Filing: Professional tax returns need to be filed as per the state’s prescribed timeline—monthly, quarterly, or annually. Online portals are available in most states to simplify the process.
Penalties for Non-Compliance
Failure to register, deduct, or deposit professional tax can lead to penalties and interest. The penalty amount varies by state and may include late filing fees and daily fines until compliance is achieved.
