Professional tax or employment tax is a tax imposed by an Indian state. Each state government of India levies a professional tax on its resident based on his/her employment.
It is a deduction that is made from the gross income before computing the tax. Professional tax can be termed as a benevolent and beneficial tax as it is not a part of the direct tax on your income.
State Governments charge the professional tax based on certain criteria. Professional tax is deducted from the salary account of the employee.
Professional tax is deducted from the monthly salary of an employee. It is withdrawn in instalments and then deposited with the state authorities. Following are the categories of people who are liable for professional tax payment.
The owner of an organization or business is responsible to deduct the tax amount from the salary of his employees and deposit it in the relevant state authorities.
Each of the private limited companies, sole proprietors, limited liability partnerships, etc. must apply for the professional tax registration upon incorporation. Even if there are no employees in the organisation, registration under professional tax is mandatory.
There are a few categories that are exempted from paying professional tax. (Again this list changes from state to state).
Each state in India operates tax services differently. They follow a unique methodology and rates while calculating the professional tax payment.
The tax is charged based on income slabs set by the government. The states are bestowed to implement this tax obeying Tax under Clause (2) of Article 276.
The maximum amount of tax that can be imposed by any state is Rs.2,500 per annum. whereas the minimum slab rate is Rs.110 per annum.
In order to calculate the professional tax, one must:
Step 1: Consider if the professional tax is applicable in the state of residence
Step 2: If yes, determine the tax amount based on monthly income
Step 3: Look at the tax slab rates according to your salary
This gives an idea of how much professional tax is deductible per month.
The slab rates differ from state to state. Currently, the professional tax is applicable to 16 states in India and is levied on its local authorities.
The chart below exhibits the highest professional tax slab rates in various states of India.
|State||Gross monthly salary (Rs.)||Tax per month (Rs.)|
|Gujarat||12,000 and above||200|
|Maharashtra||10,000 and above||200 (300 for February)|
|Odisha||20,000 and above||200|
|Chhattisgarh||25,000 and above||200|
|Madhya Pradesh||15,000 and above||212|
|Bihar||83,000 and above||208|
|Karnataka||15,000 and above||200|
|Telangana||20,000 and above||200|
|Tamil Nadu||12,500 and above||182|
|Andhra Pradesh||20,000 and above||200|
|West Bengal||40,000 and above||200|
|Assam||25,000 and above||208 (212 for February)|
|Sikkim||40,000 and above||200|
|Meghalaya||41,667 and above||208 (212 for February)|
|Tripura||15,000 and above||208 (212 for February)|
|Kerala||20,834 and above||208|
There are certain states and union territories in India which do not impose the professional tax to its residents. They are:
Any employer who does not pay the tax even after possessing a ‘Certificate of registration’ will be penalized. Non-payment or delay in payment of professional tax results in interest rate by the government. Hence, it is advisable to calculate the taxes and get prepared in advance in order to avoid penalties. If not, the consequences include:
In case, if the information provided by is incorrect, the individual is subjected to pay the tax that is three times higher.
The overall rules governing the professional tax may vary from time to time. Hence, before attempting to a professional tax, it is advisable to check with the professional tax experts.
Read on to know When to apply for professional tax in India - Professional Tax Registration.
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