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What you need to know about professional tax

If you earn an income, you should know about professional tax. Salaried employees may have seen a small deduction for professional tax on their salary slips. But other income earners in India are also required to pay it. Not to be confused with income tax, professional tax is compulsory for anybody who earns an income in the country.

What is professional tax?

While income tax is levied by the central government on all income earners, state governments impose professional tax. This is why the taxation rates vary from state to state. If you work in a Union Territory, you may not have to pay any professional tax.

The taxation rates are levied based on different income slabs. The higher your income, the higher the professional tax you have to pay. However, the amount payable is capped at Rs 2,500 per year. When filing your income tax return, you can claim the amount paid as a deduction from your salary income.

Here’s a quick illustration of how professional tax rates vary across states:

  • Professional tax rates in Maharashtra
Income (per month)Tax rate
For men: Up to Rs 7,500Nil
For men: Above Rs 7,500 and up to Rs 10,000Rs 175 per month
For women: Up to Rs 10,000Nil
For men and women: Above Rs 10,000Rs 200 per month except for FebruaryRs 300 in February
  • Professional tax rates in West Bengal
Income (per month)Tax rate
Less than Rs 10,000Nil
Rs 10,000 and above, but less than Rs 15,000Rs 110 per month
Rs 15,000 and above, but less than Rs 25,000Rs 130 per month
Rs 25,000 and above, but less than Rs 40,000Rs 150 per month
Rs 40,000 and aboveRs 200 per month

How is professional tax collected?

The Commercial Tax Department of each state government collects professional tax on its behalf. 

In case of salaried employees, their employer is responsible for deducting the tax and paying it to the state government. The employer could be a company, partnership firm, sole proprietorship, or some other business entity. It too has to pay professional tax. So, it needs two professional tax-related certificates:

  1. Professional tax registration certificate: for paying its own professional tax dues
  2. Professional tax enrolment certificate: for deducting professional tax from its employees’ salaries and paying it to the state government

Freelancers and professionals (e.g. doctors, architects, lawyers, consultants) are also required to pay professional tax. They need to get the professional tax registration certificate to pay their dues.

However, some groups of income earners are exempt from paying professional tax. They include:

  • Senior citizens
  • Parents of mentally challenged children
  • Individuals with physical disabilities
  • Parents of physically disabled children

Payment procedure

Professional tax payments may be carried out online or offline, depending on the state government’s regulations. Some states may also demand professional tax returns to be filed according to a specified schedule.

Non-payment of professional tax within the due date may result in a penalty imposed by the respective state government. Penalties may also be levied for not registering for the applicable certificate and for not filing returns on time.

Bottom-line

Have you been paying professional tax regularly? Salaried employees just need to check their payslips to find out. But freelancers, professionals, and business owners need to register to pay the tax. It is also essential to check the taxation rates, for these are subject to change from time to time.