Understanding Professional Tax: Levies, Rates, Due Date, and Its Impact on Salaried Individuals in India
Last Updated : July 20, 2023, 4:05 p.m.
Are you an employee who receives a fixed monthly salary in India? Then, you must have heard about the professional tax (PT)
A part of your salary will be deducted as tax. It is a direct tax. You can find it in your salary slip or Form 16. The term ‘Professional tax’ may not fully convey the true meaning of the tax. Contrary to the name suggests, it is not only imposed on professionals. However, people should fully understand its meaning and why it is listed as a deduction from their salary income.
Therefore, this article aims to clarify professional tax, who deducts it, and if only salaried individuals bear it.
What is Professional Tax, and Who Levies it?
It is a tax on all occupations, businesses, and employment and is imposed based on the income from such occupations, businesses, and employment. The Commercial Taxes Department of the State Government levies it (not all states choose to impose the tax).
It applies to employees and individuals conducting business, including freelancers, professionals, etc., if their income exceeds a certain threshold.
The state government is also empowered to create laws regarding the tax as it is a tax on income according to Article 276 of the Constitution of India, which deals with taxes on professions, occupations, callings, and employment. The tax can be deducted from taxable income for the Income Tax Act of 1961.
Professional Tax Rates
As you know, the tax is levied by the state government. Each state government can impose different rules based on the individual’s annual taxable income. But, according to Article 276, a state government can impose only a maximum tax of up to ₹2,500. Let’s explore the tax slabs in a few Indian states.
Andhra Pradesh
- Monthly salary/wage up to ₹15,000: NIL.
- Monthly salary/wage between ₹15,001 – ₹20,000: ₹150.
- Monthly salary/wage > ₹20,000: ₹200 per month.
West Bengal
- Monthly salary/wage up to ₹10,000: Nil.
- Monthly salary/wage between ₹10,001 – ₹15,000: ₹110.
- Monthly salary/wage between ₹15,001 – ₹25,000: ₹130.
- Monthly salary/wage between ₹25,001 – ₹40,000: ₹150.
- Monthly salary/wage > ₹40,000: ₹200.
Maharashtra
- Monthly salary/wage up to ₹7,500 (men): Nil.
- Monthly salary/wage up to ₹10,000 (women): Nil.
- Monthly salary/wage between ₹7,501 – ₹10,000: ₹175.
- Monthly salary/wage > ₹10,000: ₹200 (300 for the last month).
Tamil Nadu
- Monthly salary/wage up to ₹3,500: Nil
- Monthly salary/wage between ₹3,501 – ₹5,000: ₹22.5
- Monthly salary/wage between ₹5,001 – ₹7,500: ₹52.5
- Monthly salary/wage between ₹7,501 – ₹10,000: ₹115
- Monthly salary/wage between ₹10,001 – ₹12,500: ₹171
- Monthly salary/wage > ₹12,500: ₹208
Telangana
- Monthly salary/wage up to ₹15,000: NIL.
- Monthly salary/wage between ₹15,000 – ₹20,000: ₹150 per month.
- Monthly salary/wage > ₹20,000: ₹200 per month.
Kerala
- Monthly salary/wage up to ₹1,999: Nil.
- Monthly salary/wage between ₹3,000 – ₹4,999: ₹20.
- Monthly salary/wage between ₹3,000 – ₹7,499: ₹30.
- Monthly salary/wage between ₹5,000 – ₹7,499: ₹50.
- Monthly salary/wage between ₹7,500 – ₹9,999: ₹75.
- Monthly salary/wage between ₹10,000 – ₹12,499: ₹100.
- Monthly salary/wage between ₹12,500 – ₹16,666: ₹125.
- Monthly salary/wage between ₹16,667 – ₹20,833: ₹166.
- Monthly salary/wage > ₹20,834: ₹208.
Professional Tax Due Date
The following tabular column represents the tax due date for the states mentioned above.
| S No | State | Periodicity | Professional Tax Payment Due Date |
|---|---|---|---|
| 1 | Andhra Pradesh | Monthly | 10th of every month. |
| 2 | Kerala | Half Yearly | 28th of February and 31st of August |
| 3 | Maharashtra | Monthly | Last day of every month |
| 4 | Tamil Nadu | Half Yearly | September 30 and March 31 |
| 5 | Telangana | Monthly | 10th of every month |
| 6 | West Bengal | Monthly | 21st of every month |
Who Should Pay Professional Taxes?
The individuals who fall under the following categories must pay the PT.
- Employees who receive a fixed salary
- Independent professionals, such as physicians, attorneys, certified accountants, etc.
- Independent contractors
- Entrepreneurs
- Members of a partnership firm
- Executives of a company
- Owners of any business conducted within the state
The liability for the tax is determined by the total revenue earned by the individual in the previous year. The tax is deducted from the employee’s salary every month, and the employer must deduct and remit the collected amount to the appropriate authority. Registering for the PT is mandatory within 30 days of hiring employees for a business or, in the case of professionals, within 30 days of starting their practice.
Exemptions in Professional Tax
Although everyone who receives a regular income should pay the tax, there are certain exemptions. You don’t have to pay the tax if you fall into the categories specified below.
- Member of the Armed Forces (subject to the Army, Air Force, and Navy Act)
- An individual with a mental or physical disability. Disability can include blindness, hearing impairment, etc.
- Low-income earners who earn below the threshold.
- Parent of a child with a disability.
- Charitable hospitals that come under the Taluk level.
- Individuals with only income from agriculture.
- Badli workers/ temporary workers (substitutes) employed in a factory.
- Individuals running an educational institution.
- A foreign national employed by the relevant state.
- Any individual over the age of 65.
- Women who exclusively work as agents under the Government’s Mahila Pradhan Kshetriya Bachat Yojana.
Conclusion
What is professional tax ? Working individuals must know the answer. It is essential to check the threshold and determine whether you must pay the tax. Also, you should check if you fall under the exemptions. You should know the tax for your state and determine the amount that will be deducted from your salary. Doing this will help you in many ways, like planning your finances. Therefore, we encourage you to pay taxes and be a responsible citizen.
FAQs
1. Is it a must for freelancers to pay the PT?
Freelancers who earn above the limit set by their state government must pay the tax. For others, it is not a must.
2. How is PT calculated under income tax?
It is written under gross salary, allowance, and HRA.
3. What is the PT for Union Territories?
Since the state government levies the tax and UTs come under the Central Government, there are no employment taxes for UTs.
4. Are there any penalties if I don't pay the PT?
Yes, you must pay the penalty if you miss to pay the PT. The penalties differ in every state depending on the rules the respective state government imposes.