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Why Is Professional Tax Deducted From Your Salary?

The Maharashtra State Tax on Professions, Trades, Callings and Employment Rules, 1975 have been amended by the Maharashtra Government. This has increased the professional tax liability limit for submission of returns (for certain groups of people) from ₹50, 000 to ₹100, 000.

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 of 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.

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 of more than  ₹2,500 per year. Hence, for several individuals, the professional tax is deducted from their salary.

With the help of an online CTC calculator, you can calculate your salary after all the deductions without anyone’s help.

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. 

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  ₹ 50 p.a 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  ₹ 7,500 (Men) NIL
Up to  ₹ 10,000 (Women) NIL
₹7,500-  ₹ 10,000 ₹ 175/month
Above  ₹ 10,000

Normal months –  ₹ 200/month

February-              ₹ 300

Professional Tax in Karnataka

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

 Professional Tax in West Bengal

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

 Professional Tax in Madhya Pradesh

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

 Professional Tax in Tamil Nadu

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

 Professional Tax in Andhra Pradesh

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

 Professional Tax in Gujarat

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

 Professional Tax in Odisha

Up to  ₹ 5,000 NIL
₹ 5,000 –  ₹6,000 ₹ 30/month
₹ 6,000 – ₹ 8,000 ₹ 50/month
₹ 8,000 –  ₹10,000 ₹ 75/month
₹ 10,000 –  ₹ 15,000 ₹ 100/month
₹ 15,000  –  ₹20,000   ₹150/month
Above  ₹ 20,000 ₹ 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

Conclusion 

We tried our best to provide you with clear and relevant information, for further doubts and help contact our team or leave your comment below.

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