Why is professional tax deducted from your salary?

Last Updated at: April 23, 2020
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Why is professional tax deducted from your salary_

If you have taken a close look at your detailed payslip, you might have seen certain deductions in it. You don’t get your full basic pay every month. Rather, a certain sum of money is lost from that, and this might be due to EPF deduction or TDS deductions.  Another important deduction that occurs on your basic salary is the one for Professional tax. While you are losing out on some money due to this, how many of you are aware of what it is? Do you know what Professional tax is and why you have to pay it? If not, then this article is a good place to start! Here’s a look at how and why professional tax is deducted from your salary.

  1. What is Professional Tax?

  2. Why does professional tax deducted from salary vary?

  3. Who collects the professional tax deducted from salary?

  4. How much professional tax is deducted from salary by each state?

  5. Which professionals don’t get professional tax deducted from salary usually?

What is Professional Tax?

Professional tax is a special tax levied by respective state governments on individuals who make a living via any profession or occupation. Additionally, you must not take Professional tax for its word meaning and suppose that only professionals need to pay this tax. Rather, it is an umbrella term that includes the tax that someone has to pay because they are employed in any profession.

Even employees working for firms and people owning businesses need to pay this tax. Therefore, in no way is the Professional Tax just for doctors, engineers or lawyers. Each and every individual living within a particular state and earning an income is eligible to pay this tax. Since the State government levies this tax, its computation varies in different states. However, the Centre has made it clear that no State can collect Professional tax more than INR 2,500 per year. Hence, for several individuals, the professional tax is deducted from their salary.

Why does professional tax deducted from salary vary?

Professional Tax comes under the jurisdiction of state governments, and not under the control of the Central government. Therefore, there is no single law that explains how to calculate this tax for the entire country. Rather, every state government has a body that frames laws regarding the collection of Professional tax. As mentioned above, the center has only specified what is the maximum amount that may be collected in a given year. Therefore, the rest of the rules related to the collection of professional tax are made by the respective state governments. Hence, each state has its own professional tax slab rates, and so the tax is calculated based on these slabs. Also, certain states and Union Territories in India do not charge Professional tax. 

Get Professional Tax Registration

Furthermore, the entire tax for a year is split by 12 into equal installments which the individual pays every month. However, in some cases, the month of February requires the payment of a higher tax than the rest of the months. There are also situations wherein incomes from various sources become liable to different taxes. For instance, in some states, individuals who run a business related to medicine must pay INR 50 pa for every pharmacy they own. However, such special taxes and fees will usually be subjected to a cap when calculated on a yearly basis.

Who collects the professional tax deducted from salary?

  1. Employers can collect the tax from their employees, or deduct it from their monthly salaries and then pay it as a whole. The employer can collect all these deductions and then pay it up together to the State government. However, if they fail to do so, even after collecting deductions from their employees they will have to face penalties. Furthermore, they also have the option of letting their employees file their own Professional tax returns. However, once you collect the sum, the employer must make sure that he or she pays the required Professional tax. 
  2. In case you are a professional freelancer, you can file your own Professional tax returns by filing the required form. After you register with the concerned authorities, you will receive a registration number. In the future, this registration number may be used to pay your outstanding professional tax. However, before doing so, it is advisable for such individuals to meet with tax professionals. Certain states provide rebates if the due amount is paid as a lump sum and tax professionals will know about such rebates in clarity.

How much professional tax is deducted from salary by each state?

Professional Tax in Maharashtra

Up to INR 7,500 (Men) NIL
Up to INR 10,000 (Women) NIL
INR 7,500- INR 10,000 INR 175/month
Above INR 10,000 Normal months – INR 200/month

February-             INR 300

 

Professional Tax in Karnataka

Up to INR 15,000 NIL
Above INR 15,000 INR 200/month

 

Professional Tax in West Bengal

Up to INR 8,500 NIL
INR 8,500-INR 10,000 Rs 90/month
Rs 10,000-INR 15,000 INR 110/month
INR 15,000-INR 25,000 Rs 130/month
Rs 25,000-INR 40,000 INR 150/month
Above INR 40,000  Rs 200/month

 

Professional Tax in Madhya Pradesh

Up to INR 1.5 Lakhs NIL
INR 1.5 lakhs- INR 1.8 lakhs INR 125/month
Above INR 1.8 lakhs INR 212/month

 

Professional Tax in Tamil Nadu

Up to INR 21,000 NIL
Rs 21,000- 30,000 INR 100/month
INR 30,000-INR 45,000 Rs 235/month
INR 45,000-INR 60,000 Rs 510/month
Rs 60,000-INR 75,000 INR 760/month
Above INR 75,000 Rs 1095/month

 

Professional Tax in Andhra Pradesh

Up to INR 15,000 NIL
INR 15,000- INR 20,000 INR 150/month
Above INR 20,000 INR 200/month

 

Professional Tax in Gujarat

Up to INR 5,999 NIL
Rs 6,000- 8,999 INR 80/month
INR 9,000- INR 11,999 Rs 150/month
Above INR 12,000 RS 200/month

 

Professional Tax in Odisha

Up to INR 5,000 NIL
Rs 5,000- 6,000 INR 30/month
INR 6,000-INR 8,000 Rs 50/month
Rs 8,000- 10,000 INR 75/month
INR 10,000- INR 15,000 Rs 100/month
Rs 15,000-  20,000 150/month
Above INR 20,000 INR 200/month

 

Which professionals don’t get professional tax deducted from salary usually?

  1. Army, air force, navy, and other auxiliary force or reserve members
  2. People working in defense-related factories like Ordnance Factory
  3. Badli workers from the textile industry
  4. Employees who have permanent physical disabilities such as blindness
  5. Parents/guardians of people with physical or mental disabilities
  6. Women under  MPKBY scheme of small savings
  7. People above the age of 65

 

 

 

0

Why is professional tax deducted from your salary?

234

If you have taken a close look at your detailed payslip, you might have seen certain deductions in it. You don’t get your full basic pay every month. Rather, a certain sum of money is lost from that, and this might be due to EPF deduction or TDS deductions.  Another important deduction that occurs on your basic salary is the one for Professional tax. While you are losing out on some money due to this, how many of you are aware of what it is? Do you know what Professional tax is and why you have to pay it? If not, then this article is a good place to start! Here’s a look at how and why professional tax is deducted from your salary.

  1. What is Professional Tax?

  2. Why does professional tax deducted from salary vary?

  3. Who collects the professional tax deducted from salary?

  4. How much professional tax is deducted from salary by each state?

  5. Which professionals don’t get professional tax deducted from salary usually?

What is Professional Tax?

Professional tax is a special tax levied by respective state governments on individuals who make a living via any profession or occupation. Additionally, you must not take Professional tax for its word meaning and suppose that only professionals need to pay this tax. Rather, it is an umbrella term that includes the tax that someone has to pay because they are employed in any profession.

Even employees working for firms and people owning businesses need to pay this tax. Therefore, in no way is the Professional Tax just for doctors, engineers or lawyers. Each and every individual living within a particular state and earning an income is eligible to pay this tax. Since the State government levies this tax, its computation varies in different states. However, the Centre has made it clear that no State can collect Professional tax more than INR 2,500 per year. Hence, for several individuals, the professional tax is deducted from their salary.

Why does professional tax deducted from salary vary?

Professional Tax comes under the jurisdiction of state governments, and not under the control of the Central government. Therefore, there is no single law that explains how to calculate this tax for the entire country. Rather, every state government has a body that frames laws regarding the collection of Professional tax. As mentioned above, the center has only specified what is the maximum amount that may be collected in a given year. Therefore, the rest of the rules related to the collection of professional tax are made by the respective state governments. Hence, each state has its own professional tax slab rates, and so the tax is calculated based on these slabs. Also, certain states and Union Territories in India do not charge Professional tax. 

Get Professional Tax Registration

Furthermore, the entire tax for a year is split by 12 into equal installments which the individual pays every month. However, in some cases, the month of February requires the payment of a higher tax than the rest of the months. There are also situations wherein incomes from various sources become liable to different taxes. For instance, in some states, individuals who run a business related to medicine must pay INR 50 pa for every pharmacy they own. However, such special taxes and fees will usually be subjected to a cap when calculated on a yearly basis.

Who collects the professional tax deducted from salary?

  1. Employers can collect the tax from their employees, or deduct it from their monthly salaries and then pay it as a whole. The employer can collect all these deductions and then pay it up together to the State government. However, if they fail to do so, even after collecting deductions from their employees they will have to face penalties. Furthermore, they also have the option of letting their employees file their own Professional tax returns. However, once you collect the sum, the employer must make sure that he or she pays the required Professional tax. 
  2. In case you are a professional freelancer, you can file your own Professional tax returns by filing the required form. After you register with the concerned authorities, you will receive a registration number. In the future, this registration number may be used to pay your outstanding professional tax. However, before doing so, it is advisable for such individuals to meet with tax professionals. Certain states provide rebates if the due amount is paid as a lump sum and tax professionals will know about such rebates in clarity.

How much professional tax is deducted from salary by each state?

Professional Tax in Maharashtra

Up to INR 7,500 (Men) NIL
Up to INR 10,000 (Women) NIL
INR 7,500- INR 10,000 INR 175/month
Above INR 10,000 Normal months – INR 200/month

February-             INR 300

 

Professional Tax in Karnataka

Up to INR 15,000 NIL
Above INR 15,000 INR 200/month

 

Professional Tax in West Bengal

Up to INR 8,500 NIL
INR 8,500-INR 10,000 Rs 90/month
Rs 10,000-INR 15,000 INR 110/month
INR 15,000-INR 25,000 Rs 130/month
Rs 25,000-INR 40,000 INR 150/month
Above INR 40,000  Rs 200/month

 

Professional Tax in Madhya Pradesh

Up to INR 1.5 Lakhs NIL
INR 1.5 lakhs- INR 1.8 lakhs INR 125/month
Above INR 1.8 lakhs INR 212/month

 

Professional Tax in Tamil Nadu

Up to INR 21,000 NIL
Rs 21,000- 30,000 INR 100/month
INR 30,000-INR 45,000 Rs 235/month
INR 45,000-INR 60,000 Rs 510/month
Rs 60,000-INR 75,000 INR 760/month
Above INR 75,000 Rs 1095/month

 

Professional Tax in Andhra Pradesh

Up to INR 15,000 NIL
INR 15,000- INR 20,000 INR 150/month
Above INR 20,000 INR 200/month

 

Professional Tax in Gujarat

Up to INR 5,999 NIL
Rs 6,000- 8,999 INR 80/month
INR 9,000- INR 11,999 Rs 150/month
Above INR 12,000 RS 200/month

 

Professional Tax in Odisha

Up to INR 5,000 NIL
Rs 5,000- 6,000 INR 30/month
INR 6,000-INR 8,000 Rs 50/month
Rs 8,000- 10,000 INR 75/month
INR 10,000- INR 15,000 Rs 100/month
Rs 15,000-  20,000 150/month
Above INR 20,000 INR 200/month

 

Which professionals don’t get professional tax deducted from salary usually?

  1. Army, air force, navy, and other auxiliary force or reserve members
  2. People working in defense-related factories like Ordnance Factory
  3. Badli workers from the textile industry
  4. Employees who have permanent physical disabilities such as blindness
  5. Parents/guardians of people with physical or mental disabilities
  6. Women under  MPKBY scheme of small savings
  7. People above the age of 65

 

 

 

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