How Professional Tax is Calculated

A professional tax is calculated on the basis of your salary and predetermined slabs. You can have to pay anything between ₹ 200 to ₹ 2500 a month. Assam, Andhra Pradesh, Gujarat, Bihar, Karnataka, Kerala, Orissa, Madhya Pradesh, Meghalaya, Tamil Nadu, Telangana, Tripura, West Bengal, Maharashtra, Puducherry, Chattisgarh, Manipur and Mizoram are some of the states that impose a professional tax.

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How does professional tax registration work for you?

A company working in different states is required to register for professional tax in all the states it is present at.

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Professional tax in India: How professional tax is calculated

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.

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Who are liable to pay professional tax?

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 It is withdrawn in instalments and then deposited with the state authorities.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.

  • An individual employed for a monthly salary. It can be either a government or private entity.
  • Individuals involved in trade or professions such as doctor, lawyer, CA, etc.
  • In the case of other class employees, the person himself is liable to pay the tax.

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.

Who are exempted from paying professional tax?

There are a few categories that are exempted from paying professional tax. (Again this list changes from state to state).

  • Parents or guardians of children with disability
  • Members serving for the state and nation like Air Force, Navy, Army, and other Auxiliary forces.
  • Individuals over 65 years of age
  • Individuals with a physical disability

How professional tax is calculated?

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.

Professional tax slabs

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

States and Union Territories where professional tax is not applicable:

There are certain states and union territories in India which do not impose the professional tax to its residents. They are:

  • Arunachal Pradesh
  • Haryana
  • Himachal Pradesh
  • Jammu & Kashmir
  • Rajasthan
  • Nagaland
  • Uttar Pradesh
  • Uttaranchal
  • Andaman & Nicobar
  • Daman & Diu
  • Dadra & Nagar Haveli
  • Delhi
  • Puducherry
  • Chandigarh
  • Lakshadweep

Consequences of non-payment or late payment:

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 the case of late payment, interest rate ranging from 1% to 2% per month is charged
  • A state may also impose a penalty starting from 10% but not exceeding 50% on the total amount due.

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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