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What is Professional Tax?

Professional Tax is a tax that is levied by the State Government. Professional Tax in India is levied on income earned by any trade and is remitted by the employer. A person has to pay a tax of around Rs. 2500 every year to the state or any local authority by way of Tax on the profession, trades, callings, and employments.

Professional Tax is just like Income Tax, but the Central Government and Professional Tax collect the income tax managed by the State Government. At the time of introduction, the maximum limit on the Tax to be collected was Rs.250.

The upward revision of Professional Tax to Rs. 2500 has allowed the Government to raise additional resources.

Professional Tax Rate

The maximum amount an individual needs to pay as Professional Tax is Rs. 2500. The slab amount is usually based on the gross income of the professional. It happens to be deducted from his/ her income every month by the employer. The following state governments levy professional Tax in India.

Karnataka, West Bengal, Andhra Pradesh, Maharashtra, Tamil Nadu, Gujarat, Assam, Chhatisgarh, Kerala, Meghalaya, Orissa, Tripura, and Madhya Pradesh.

The amount deducted as Professional Tax by the employer from the salary/ wages has to deposit the same amount with the state Government.

Professional Tax Registration

The application for registration of Professional Tax must be submitted to the State Tax Department within 30 days of employing staff in a business. If there is more than one place of work, the application must be made separately to each authority considering the place of work coming under that authority's jurisdiction.

If there's a delay in Professional Tax, it can lead to a penalty of Rs. 5 per day. On non-payment or late payment, there will be a penalty of 10% of the Tax if there's the late filing of returns, a penalty of Rs. Three hundred will be imposed.

Why is Professional Tax different for different State?

As the State Government levies the Professional Tax, it differs from one state to another. Each state declares a slab, and the professional Tax is deducted basing these slabs. Also, there are many states and union territories which do not charge any professional tax too.

In India, Professional Tax is paid in 12 equal installments. In situations where the source of income falls under different sectors will also be liable for a separate tax.

Who has to pay Professional Tax?

Professional Tax in India is applicable for the individuals and entities mentioned here :

Companies, Firms, Limited Liability Partnerships, Corporation, Societies, Huf, Associations, Clubs, Legal Practitioners, contractors, Architects, Engineers, Insurance Agents, Chartered Accountants, Company Secretaries, Surveyors, Tax consultants, management professionals as well as medical representatives such as doctors, etc.

Who is Exempted from paying Professional Tax?

  • Ex-serviceman
  • Individuals serving in the Central Para Military Force (CPMF)
  • People who run educational Institutions teaching up to class 12
  • Handicaps with at least 40% disability. A relevant Certificate must be submitted.
  • Any person who has a permit for a single three-wheeler or a single taxi to carry goods.
  • Individuals who are deaf, dumb, and blind are earning a salary.
  • Civilians as well as non-civilian members from the armed forces.
  • Technicians from foreign countries who are employed by the state

The penalties on professional Tax vary in each state. Also, there is a penalty for Non-Registration. Along with the penalty for non-payment, there is also a penalty for late return filing.

Professional Tax Registration Cost

Pay as you go grow pricing

All Inclusive Pricing - No Hidden Fee

Basic

12899

all inclusive fees

Professional tax registration for employers having less than 20 employees.

Premium

15899

all inclusive fees

Professional tax registration for employers having more than 40 employees.

Frequently asked questions

How is professional Tax calculated?

In India, Professional Tax is calculated on Salary slabs. Under minimum salary, there is no tax. The maximum amount paid as Professional Tax is Rs.2500 per year. The tax slabs differ from state to state.

How much Professional Tax is deducted from my salary?

Professional Tax appears at the top of the salary slip as it is deducted even before calculating income-tax. The employer deducts it from the salary of the employee and deposits it with the State Government.

Is it mandatory to pay Professional Tax?

Professional Tax is a mandatory tax paid by every individual, and there are penalties in case of non-compliance.

Why is Professional Tax Different in every state?

The Professional Tax Rules vary from state to state. As the rules vary from state to state, each state can set limits and rates. But the maximum amount limit has been developed to Rs.2500 per year. The salary slab structures for levying Professional Tax differ from state to state.

IndiaFilings has helped thousands of entrepreneurs and Professionals right from incorporation to post-incorporation compliances. Get In touch with our advisor to know about the services offered by us.

Last updated: Mar 02, 2021

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