Professional Tax - What is Professional Tax, Rates, Due Date, Compliance

Professional tax is a tax imposed by state governments in India on individuals engaged in various professions, trades, and employment. While the tax amount varies by state, it is capped at Rs. 2,500 per year. 

Here’s a comprehensive guide to understanding professional tax, its rates, exemptions, and how to pay it.   

What is a Professional Tax, and Who Levies it?

Professional tax is a tax on all kinds of professions, trades, and employment and is levied based on the income of such profession, trade, and employment. It is levied on employees, a person carrying on the business, including freelancers, professionals, etc., subject to income exceeding the monetary threshold if any.

Professional tax is levied by the state government (not all states in the country choose to levy professional tax). The state government is also empowered to make laws concerning professional tax.

It may be noted that professional tax is allowed as a deduction as per the Income Tax Act 1961 under the old tax regime.

Professional Tax Rate

Professional tax being levied by the state government varies from state to state. Every state has its laws and regulations to govern the professional tax. However, all states follow a slab system based on income to levy professional tax.

Further, Article 276 of the Constitution, which empowers the state government to levy professional tax, also has provided for a maximum cap of Rs.2,500, beyond which professional tax cannot be charged to any person. 

Few illustrative slabs in the country

Professional tax rate slabs in Karnataka for Salaried Individuals are given in table below:

Professional tax rate slabs in Delhi for Salaried Individuals are given in table below:

Professional tax rate slabs in West Bengal for Salaried Individuals are given in table below:

Due Date to Pay Professional Tax

The due date to deposit professional tax varies from state to state. Each state has its own specified due date by which the applicable professional tax has to be paid to the respective state government. 

Who is Responsible to Collect Professional Tax?

Professional tax is collected by the Commercial Tax Department. The commercial tax department of the respective states collects it which ultimately reaches the fund of the municipal corporation.

Who is Responsible to Pay Professional Taxes?

• In the case of employees, an employer is a person responsible for deducting and paying professional tax to the state government subject to the monetary threshold, if any, provided by the respective State’s legislation. 
• An employer (corporates, partnership firms, sole proprietorship, etc.), also being a person carrying on trade/profession, is also required to pay professional tax on his trade/profession again subject to the monetary threshold, if any, provided by respective state’s legislation.  
  In such a case, the employer needs to register and obtain both a professional tax registration certificate to be able to pay professional tax on his trade/profession and a professional tax enrolment certificate to be able to deduct the tax from his employees and pay. Further, separate registration may be required for each office, depending on the respective state’s legislation.
• Persons who are carrying on freelancing business without any employees are also required to register themselves subject to the monetary threshold, if any, provided by the respective State’s legislation.  
  However, a professional tax levy is subject to the exemption provided by the respective State to certain categories. For example, parents or guardians of any person who is suffering from mental retardation or blind persons are exempted, among others, from the levy of Karnataka Professional tax.

How to Pay Professional Tax? 

Professional tax is a direct tax levied by the state government.  As a result, the form of payment may differ from one state to the next.

Professional tax, on the other hand, can be paid both online and offline. To pay professional tax, you must go to the official website of the relevant state.

It is important to note that if you are a salaried individual, then such professional tax will be collected and remitted by your employer.

Exemptions in Professional Tax

Even though everyone who earns a regular income (salary) is expected to pay the professional tax, some people are exempt. As a result, if you fall into one of the categories listed below, you are exempt from paying professional tax.

• Member of Force (Governed by Army, Air Force, Navy Act)
• An individual suffering from mental or physical disability. Disability can be blindness, deafness, etc.
• Parent of a child suffering from a disability
• Charitable hospitals are present in places that come below the taluk level
• Badli workers (temporary workers that are employed in a factory)
• Individuals running an educational institute in respect of their branches teaching classes upto 12th standard or pre-university.
• A foreign individual who has been employed by the relevant state
• Any individual above 65 years
• Women who are solely engaged as agents under the Government’s Mahila Pradhan Kshetriya Bachat Yojana

Consequences of Violating Professional Tax Regulations

Failing to comply with professional tax regulations may result in penalties, which vary from state to state.  Penalties include:

• Late payment fines (usually a percentage of the due amount)
• Penalties for failing to register
• Interest charges for delayed payment 

For example, in Maharashtra, late registration can result in a fine of Rs. 5 per day, and there’s a penalty of 10% for non-payment or delay in filing returns.

Related Articles:
1. Professional Tax in Maharashtra
2. Professional Tax in Karnataka
3. Professional Tax in West Bengal
4. Professional Tax in Delhi
5. Professional Tax in Telangana
6. Professional Tax in Gujarat
7. Professional Tax in Bihar
8. Professional Tax in Jharkhand
9. Professional Tax in Odisha
10. Professional Tax in Tamil Nadu
11. Professional Tax in Punjab
12. Professional Tax in Kerala
13. Professional Tax in Assam
14. Professional Tax in Andhra Pradesh