Professional tax, like income tax, is levied on the money made through trade or occupation, except that it is levied by the State government. While professional tax rates are much lower than the income tax, it is essential to register and pay them duly.
Many people ask, what is professional tax, and how it affects their earnings. In India, professional tax is levied by state governments, with rates varying across states. For instance, Maharashtra imposes a maximum of ₹2,500 annually, while Karnataka follows a monthly slab-based structure. This article covers professional tax slabs, compliance, filing procedures, penalties, and more to ensure better financial awareness.
What is Professional Tax?
Professional tax is a state-imposed tax on income earned through employment, business, or profession. It is deducted from salaries by employers and directly paid by self-employed individuals. The tax amount varies by state, with a maximum annual limit of ₹2,500.
The Origins and Importance of Professional Tax
Article 276 of the Indian Constitution allows state governments to levy and collect professional taxes. This tax was initially intended to generate revenue, but it now plays a vital role in financing welfare programs, education, and employment programs.
For professional tax, the Indian government has set a maximum annual limit of ₹2,500, which ensures uniformity across states. While the tax structure varies, compliance is mandatory for salaried employees, self-employed professionals, and businesses.
Why Does It Exist?
State governments rely heavily on professional taxes to finance public infrastructure, healthcare, and skill development.
Why does it matter?
As a result of mandatory compliance, payroll processing is smooth, legal penalties are avoided, and state welfare programs are supported. Employees are taxed by their employers, while self-employed individuals are taxed by themselves.
Who Needs to Pay Professional Tax?
Depending on the nature of the work and state-specific regulations, a professional tax may be owed by individuals and businesses who earn income from employment, self-employment, or business operations.
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Salaried Employees
- Employers deduct professional tax from salaries and remit it to the State Government.
- Employees have no separate filing obligations.
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Self-employed Professionals
- Individuals such as doctors, lawyers, freelancers, and consultants must register with the state tax department and pay directly.
- Payment frequency depends on state regulations.
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Business Owners
- Business entities must register and pay professional tax for their firm.
- If they have employees, they must deduct and deposit tax.
Exemptions
Certain individuals and groups are exempt in various states:
- Senior citizens
- Disabled individuals (with a specified disability percentage)
- Armed forces personnel
| Category | Liability | Exemptions (State-Specific) |
| Salaried Employees | Deducted by employer | N/A |
| Self-Employed Professionals | Pay directly | Senior citizens, disabled individuals |
| Business Owners | Pay for firm & employees | N/A |
| Armed Forces Personnel | Exempt in many states | Armed forces exemption |
State-wise Professional Tax Rates & Slabs
Individuals earning income through employment, profession, or trade are liable to pay professional taxes in India. Article 276 of the Indian Constitution limits professional taxes to 2,500 dollars per year, based on different rates and slabs in different states. The following are the professional tax rates in select states:
| State | Tax Deduction Period | Salary Slab | Tax per Month/Year | Deadline for Payment |
| Andhra Pradesh | Monthly | Up to ₹15,000 | Nil | 30th June (if enrolled before 31st May), otherwise within a month |
| ₹15,001 – ₹20,000 | ₹150 | |||
| Above ₹20,000 | ₹200 | |||
| Assam | Monthly | Up to ₹10,000 | Nil | 28th of every month |
| ₹10,001 – ₹15,000 | ₹150 | |||
| ₹15,001 – ₹24,999 | ₹180 | |||
| ₹25,000 and above | ₹208 | |||
| Bihar | Yearly | Up to ₹3,00,000 | Nil | 30th November |
| ₹3,00,001 – ₹5,00,000 | ₹1,000 | |||
| ₹5,00,001 – ₹10,00,000 | ₹2,000 | |||
| Above ₹10,00,000 | ₹2,500 | |||
| Chhattisgarh | Monthly | Up to ₹1,00,000 | Nil | Within 10 days of month-end |
| ₹1,00,001 – ₹1,50,000 | ₹130 | |||
| ₹1,50,001 – ₹2,00,000 | ₹150 | |||
| ₹2,00,001 – ₹2,50,000 | ₹200 | |||
| Above ₹2,50,001 | ₹208 (₹212 in last month) | |||
| Gujarat | Monthly | Up to ₹12,000 | Nil | 30th September (if enrolled before 31st Aug), otherwise within a month |
| Above ₹12,000 | ₹200 | |||
| Jharkhand | Quarterly | Up to ₹3,00,000 | Nil | 15th May, 16th Aug, 15th Nov, 15th Feb |
| ₹3,00,001 – ₹5,00,000 | ₹100 | |||
| ₹5,00,001 – ₹8,00,000 | ₹150 | |||
| ₹8,00,001 – ₹10,00,000 | ₹175 | |||
| Above ₹10,00,000 | ₹208 | |||
| Karnataka | Monthly | Up to ₹25,000 | Nil | 20th of the succeeding month |
| Above ₹25,000 | ₹200 | |||
| Kerala | Every 6 months | Up to ₹11,999 | Nil | 31st Aug (Apr-Sep), End of Feb (Oct-Mar) |
| ₹12,000 – ₹17,999 | ₹120 | |||
| ₹18,000 – ₹29,999 | ₹180 | |||
| ₹30,000 – ₹44,999 | ₹300 | |||
| ₹45,000 – ₹59,999 | ₹450 | |||
| ₹60,000 – ₹74,999 | ₹600 | |||
| ₹75,000 – ₹99,999 | ₹750 | |||
| ₹1,00,000 – ₹1,24,999 | ₹1,000 | |||
| Above ₹1,25,000 | ₹1,250 | |||
| Maharashtra | Monthly | Up to ₹7,500 | Nil | 30th June (if enrolled before 31st May), otherwise within 30 days |
| ₹7,501 – ₹10,000 | ₹175 | |||
| Above ₹10,001 | ₹200 (₹300 in last month) | |||
| Tamil Nadu | Every 6 months | Up to ₹21,000 | Nil | 30th Sep (Apr-Sep), 31st Mar (Oct-Mar) |
| ₹21,001 – ₹30,000 | ₹100 | |||
| ₹30,001 – ₹45,000 | ₹235 | |||
| ₹45,001 – ₹60,000 | ₹510 | |||
| ₹60,001 – ₹75,000 | ₹760 | |||
| Above ₹75,000 | ₹1,095 | |||
| Telangana | Monthly | Up to ₹15,000 | Nil | 30th June (if enrolled before 31st May), otherwise within a month |
| ₹15,001 – ₹20,000 | ₹150 | |||
| Above ₹20,000 | ₹200 | |||
| West Bengal | Monthly | Up to ₹10,000 | Nil | 31st July every year |
| ₹10,001 – ₹15,000 | ₹110 | |||
| ₹15,001 – ₹25,000 | ₹130 | |||
| ₹25,001 – ₹40,000 | ₹150 | |||
| Above ₹40,000 | ₹200 |
How to Register and File Professional Tax?
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For Employees (Handled by Employers)
- Employers must register for professional tax in their respective states.
- The tax is deducted from employee salaries and deposited with the state government.
- Employers must file professional tax returns as per the state’s timeline (monthly, quarterly, or annually).
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For Self-Employed Professionals
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- Register on the State Tax Portal.
- Obtain a Professional Tax Registration Certificate (PTRC).
- Pay tax as per the applicable slab.
- Filing frequency depends on state regulations (monthly, quarterly, or annually).
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For Businesses (Companies, Firms, LLPs, Startups)
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- Obtain a Professional Tax Enrollment Certificate (PTEC).
- Register under PTRC to deduct tax from employees.
- Pay professional tax for employees and for the business, if applicable.
- File periodic returns with the state government as per deadlines.
Documents Required for Professional Tax Registration
For Employees (Handled by Employer)
- PAN Card of the business
- Employee salary details (payroll records)
- Business incorporation certificate (for companies, LLPs, and startups)
- Employer’s address proof (electricity bill, rental agreement, etc.)
- GST Registration Certificate (if applicable)
For Self-Employed Professionals
- Identity proof (Aadhaar Card, PAN Card, or Passport)
- Address proof (Electricity bill, rental agreement, or bank statement)
- Professional Tax Registration Certificate (PTRC)
- Business registration certificate (for freelancers, consultants, and professionals)
Professional Tax Fees & Penalties for Late Payment
Professional tax in India varies by state, with fees typically ranging up to ₹2,500 per year. Non-compliance can lead to penalties, including late filing fees of ₹1,000 to ₹2,000, interest charges of 1.25% per month on overdue amounts, and fines of ₹5 per day for non-registration.
| Penalty Type | Penalty Charge |
| Late Filing | ₹1,000 to ₹2,000 per return |
| Non-Payment | Interest at 1.25% per month |
| Non-Registration | ₹5 per day until registered |
Benefits of Professional Tax Compliance
- Legal Compliance – Staying compliant with professional tax regulations avoids penalties, interest charges, and legal issues. Timely payments ensure businesses and professionals operate within state laws.
- Financial Discipline – Regularly filing professional tax instills financial discipline, preventing last-minute tax burdens. It also helps businesses manage cash flow efficiently.
- Business Credibility – Professional tax compliance is often mandatory for government tenders, licenses, and contracts. Companies with a clean tax record gain a stronger reputation and trust in the industry.
- Smooth Business Operations – Paying professional tax on time prevents disruptions, as non-compliance can lead to hefty fines or account freezes by tax authorities.
- Avoids Legal Consequences – Non-compliance can result in legal notices and restrictions on business activities. Timely tax payments ensure smooth operations and hassle-free business growth.
Top Tools for Professional Tax Filing & Management
- Payroll Management Software – Helps companies manage deductions and filings.
- State Tax Portals – For direct registration and filing.
Need Help With Professional Tax Services?
Handling professional tax can be challenging due to complex state-wise regulations, frequent deadlines, and penalties for late payments. Businesses and professionals often face difficulties registering, calculating deductions, and filing returns accurately, leading to compliance issues and financial penalties.
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FAQs
What is Professional Tax?
Professional Tax is a state-imposed tax levied on salaried employees, self-employed individuals, and businesses engaged in any profession or trade. It is deducted as per the state's prescribed slab rates.
What is a professional tax on salary?
Professional Tax is deducted from an employee’s salary by the employer and paid to the state government. The amount varies by state and is based on income slabs specified under state laws.
What is the section under which tax is deducted at source on payment of professional fees?
Tax on professional fees is deducted under Section 194J of the Income Tax Act, 1961. It applies to professional or technical service payments exceeding ₹30,000 in a financial year at a 10% TDS rate (2% for technical services).
What is the professional tax rate applicable in different states?
The professional tax rate varies across states, typically ranging from ₹200 to ₹2,500 per year. Some states, like Delhi and Haryana, do not levy professional tax, while others have monthly, quarterly, or yearly payment requirements.
Can professional tax be refunded?
No, professional tax is a direct tax and is not refundable once paid. However, incorrect deductions or overpayments can be adjusted with the concerned state tax department.
Who should pay professional tax?
Professional tax must be paid by salaried employees, self-employed professionals, businesses, and traders in states where it is applicable. Employers deduct it from salaries, while self-employed individuals pay it directly.
What is the maximum professional tax amount payable annually?
The maximum professional tax payable per year is ₹2,500, as per the Constitution of India. The actual amount varies based on the state’s tax slabs and income thresholds.
Is professional tax applicable to freelancers and consultants?
Yes, freelancers and consultants must pay professional tax if they operate in a state that levies it. They need to register under PTEC (Professional Tax Enrollment Certificate) and pay the tax as per the state’s slab rates.
