What Are Professional Tax And State-wise Laws

Have you ever looked at your salary slip and wondered what the term “professional tax” means?

Let’s answer that very question and discuss it in detail and its exact nature and implications.

Professional tax is a state tax. The state government imposes this particular tax instead of the infrastructure and other facilitating provisions it gives for carrying out the profession. In this sense, the state charges for using its infrastructure and facilities through which the profession or jobs are conducted.

Article 276(2) of the Indian Constitution has provisions for the professional tax charged by the state government wherein the employer deducts the tax from the employees’ salary and eventually, it gets remitted to the state government. The article says:

“….shall be levied and collected on professions, trades, callings, and employments, following the provisions of this Act. Every person engaged in any profession, trade, calling, or employment and falling under one or the other of the classes mentioned in the second column of the Schedule shall be liable to pay to the State Government tax at the rate mentioned against the class of such persons in the third column of the said Schedule. Provided that entry 23 in the Schedule shall apply only to such classes of persons as may be specified by the State Government by notification from time to time.”

In this blog:

• Important Points Regarding Professional Tax
• State-wise Provisions and Slabs (FY 2020-21)

You can navigate to the topics directly from here.

Important Points Regarding Professional Tax

• The maximum amount that can be deducted under professional tax annually cannot exceed ₹2500.
• Professional tax with income tax is not the same. The deduction through professional tax is exempted under income tax. If it is chosen to file returns through the new tax regime then, the professional tax won’t be exempted under income tax.
• It is compulsory to pay professional tax if the person is eligible to do so.
• Even non-salaried people (who earn income through other means) may be liable to pay professional tax.
• Following the ‘Professions, Trades, Callings and Employments Act of 2000, professionals earning a monthly income above a specified limit are liable to pay the tax.
• Freelance professionals are also required to register for payment of professional tax through a special form that gives them a registration number which is used to pay the tax in various banks.

State-wise Provisions and Slabs (FY 2020-21)

Remember, professional tax is a state tax, and the state government levies it on professionals for carrying out their profession in that particular state.

The slabs and provisions differ from state to state. Also, NOT all states impose a professional tax. The following states in India levy professional tax :

1.  Andhra Pradesh
2.  Assam
3.  Bihar
4.  Gujarat
5.  Karnataka
6.  Kerala
7.  Madhya Pradesh
8.  Meghalaya
9.  Odisha
10.  Sikkim
11.  Tamil Nadu
12.  Telangana
13.  Tripura
14.  West Bengal
15.  Maharashtra
16.  Jharkhand
17.  Manipur
18.  Mizoram
19.  Pondicherry
20.  Chhattisgarh

If you belong to any of the states not mentioned above, you won’t find professional tax under deductions in your salary slip.

Now, let us look at the different tax rate slabs in each of the aforementioned states –

Andhra Pradesh

Assam

Bihar

Gujarat

Goa

Jharkhand

Karnataka

Kerala

Maharashtra

Note- Women earning up to ₹10,000 (per month) are exempted from paying professional tax.

Madhya Pradesh

Also read: Steps to Incorporate a Foreign Company in India

Manipur

Meghalaya

Nagaland

Odisha

Pondicherry

Punjab

Tamil Nadu

Telangana

Tripura

West Bengal