What is Income Tax?

Income Tax is a direct tax imposed by the Central Government on the income earned by individuals, businesses, firms, and other entities.

Income Tax is governed under the Income Tax Act, 1961 and administered by the Income Tax Department of India.

Income Tax applies to:

The amount payable depends on the taxpayer’s annual taxable income and applicable tax slab.

Difference Between Professional Tax and Income Tax

Basis	Professional Tax	Income Tax
Levied By	State Government	Central Government
Governing Law	State-specific laws	Income Tax Act, 1961
Applicable To	Professionals, employees, businesses	Individuals and entities earning taxable income
Tax Collection	State Commercial Tax Department	Income Tax Department
Tax Amount	Fixed slab-based amount	Based on income slabs
Maximum Limit	Usually ₹2,500/year	No upper limit
Deducted By	Employer	Self-assessment or TDS
Filing Frequency	Monthly/Quarterly/Annual	Annual return filing
Applicability by State	Only in selected states	Applicable throughout India
Purpose	State revenue collection	National revenue collection

Professional Tax is applicable to:

However, Professional Tax is not applicable in all states and union territories.

States like:

have Professional Tax regulations.

Income Tax must be paid by:

Income Tax liability depends on:

Professional Tax is generally calculated based on salary slabs defined by state governments.

Example:

The rates differ across states.