The slab rate for professional tax in India is decided by each State, just like it is for all other direct taxes. The Constitution's Article 246 states that only Parliament has the authority to create legislation concerning topics on the Union List, which includes income tax.
On income obtained from a profession, trade, calling, or job, a state-level tax known as the “professional tax” is levied. The tax is calculated using slabs based on the income of the individual, who may be a self-employed person or an employee of an organisation. Currently, there is a limit of ₹2500 on the amount of tax that may be levied.
You must pay professional tax and receive a regular paycheck if you are working. You must have come across the phrase “professional tax” on your monthly pay stubs. You will find it listed below your gross income, allowance, and HRA.
Along with EPF, TDS, and any other deductions, professional tax is subtracted from your gross pay.
However, this tax does not imply that it is only imposed on those who work as professionals, such as doctors, lawyers, and other professionals. You can pay this tax if you receive a wage. Let’s first examine what professional tax is before continuing.
What is Professional Tax?
Professional tax is a tax on all different types of employment, trades, and professions that are assessed depending on their respective revenue. Employees, anyone operating a business, including independent contractors, professionals, etc., are subject to the tax if their income is above the applicable threshold.
According to Article 246 of the Indian Constitution, only Parliament has the unique authority to enact laws pertaining to the Union List, which includes income taxes. Only the Concurrent and State list laws are subject to state legislative authority.
Who Levies P Tax?
The Central Government is responsible for enforcing the Income Tax Act. The states are in charge of profession tax. States impose a direct tax on every person who earns money. Although professional tax registration is handled by state governments, not all states collect it from individuals.
The sole body with the authority to enact laws pertaining to income tax is Parliament, as stated in Article 246 of the Indian Constitution. State governments do have the authority to pass legislation regarding some taxes, such as the professional tax. States are permitted to enact legislation governing this state government tax under Article 276 of the Indian Constitution.
Professional Tax Slab in India
The professional tax is imposed by the state government, hence the rate varies from state to state. To regulate professional tax, each state has its own set of laws and rules. To levy this tax, there is a typical slab structure that is based on the income.
Additionally, the Constitution’s Article 276 gives the state government the authority to impose a professional tax. The highest limit set forth in Article 276 is ₹2,500. Therefore, it is prohibited to impose this tax on anyone beyond this threshold.
To know in detail, click here: Professional Tax Enrollment
Professional Tax Applicability
Not everyone who practices a profession is required to pay professional tax. It also applies to the other divisions. The list of parties who must pay professional tax is provided below.
- Physicians and other medical professionals
- Businesses and Commercial Firms
- Limited Liability Corporations (LLP)
- Licensed Accountants (CA)
- Management consultants
- Agents of insurance
- Tax advisors
- Company Secretaries (CS)
- Indian Unified Family
- Cooperative Societies and Organisations
- A surveyor
- Business owners
- Attorney and legal professionals
What is the Process of Professional Tax?
The slab rate for professional tax in India is decided by each State, just like it is for all other direct taxes. The Constitution’s Article 246 states that only Parliament has the authority to create legislation concerning topics on the Union List, which includes income tax.
The State of India, however, has the discretion to make the imposition of professional tax in cases involving the States and Concurrent listings voluntary. You can subtract this tax from your tax liability. Because it is a source of income, most Indian states impose a professional tax. In India, the Commercial Tax Department of the relevant State is responsible for collecting professional taxes.
Who Is Responsible For Collecting And Paying Professional Tax?
Those who must collect professional taxes—
The Commercial Tax Department is responsible for collecting professional tax. The State’s commercial tax division organises it and finally goes to the municipality corporation budget.
Those who must pay professional taxes—
1. Employers are accountable for withholding and paying professional tax to the state government on behalf of their employees, subject to any financial thresholds established by the laws of the individual States.
2. Employers (corporations, partnership firm, sole proprietorships, etc.) who additionally practise their trade or profession are obligated to pay professional tax on such activities, again according to any financial thresholds established by the individual State’s laws.
In this situation, the company must file and have a professional tax certificate of registration and a professional tax enrollment certification to be allowed to submit professional tax on their trade or profession and withhold the tax from their staff’ salaries. Moreover, based on each state’s laws, separate registration may be necessary for each company.
3. People who operate a freelance career without any staff must also register according to the concerned State’s legal requirements for any applicable financial threshold.
4. A professional tax charge is subject to the exemptions that the relevant State grants to specific groups. Parents or guardians of someone with mental impairment are excused from paying The professional tax, as are blind people and many others.
As a business owner, keeping track of all your employees’ tax situations can become hectic. That is why Vakilsearch is here to help you manage your tax requirements! Once you visit and contact Vakilsearch, there is no need to invest time and tedious attempts in managing employee data, their Professional Tax contributions, and payment to respective authorities.
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