The term “Income tax” collected by the Income Tax Department of India. Professional tax is similar to income tax, but unlike income tax, it is collected by the state government. Professional tax deducts from the employee’s salary income or applies to the income of professionals and businesses for their trade and profession. Many employees may not be aware of the professional tax registration process, tax rate slab, and who is responsible for deducting the professional tax.
Income tax imposed by the Central Government, professional tax is levied by the government of a state or union territory in India. In the case of salaried and wage earners, the professional tax is liable to be deducted by the Employer from the salary/wages, and the same is to be deposited to the state government. In the case of other classes of individuals, this tax is liable to be paid by the employee himself. The tax calculation and amount collected may vary from one State to another, but it has a maximum limit of Rs. 2500/- per year.
Professional tax is deductible from taxable income under section 16(iii) of the Income Tax Act 1961, and tax rates vary in different states of India and follow a slab system. The Commercial Tax Department collects professional tax and reaches the fund of the municipal corporation. However, professional tax is not applied in some states.
What are the types of professional tax certificates?
- Professional Tax Enrollment Certificate (PTEC):
It applies to owners of business entities, i.e., public and private companies, sole proprietors, partnership firms, and professionals. - Professional Tax Registration Certificate (PTRC):
It applies to government/ non-government employers, and they deduct the tax from the employee’s salary and pay it to the government.
Who is liable to pay professional taxes?
- Individuals carrying freelance business without employees must register if the income exceeds the threshold provided by the state’s legislation.
- Owners of sole proprietorships, corporates, and partnership firms are required to pay tax on their trade and profession if income exceeds the threshold. Employers must register for professional tax registration and obtain the certificate of professional tax registration certificate.
- An employer is liable to deduct the tax from their employee’s salary and deposit it to the state government, and it is also subject to the monetary threshold.
Professional Tax Applicable States across India
| Applicable States | Non-Applicable States |
|---|---|
| Andhra Pradesh | Central |
| Assam | Andaman and Nicobar Islands |
| Bihar | Arunachal Pradesh |
| Gujarat | Chandigarh |
| Jharkhand | Chhattisgarh |
| Karnataka | Dadra and Nagar Haveli |
| Kerala | Daman and Diu |
| Madhya Pradesh | Delhi |
| Maharashtra | Goa |
| Manipur | Haryana |
| Meghalaya | Himachal Pradesh |
| Mizoram | Jammu and Kashmir |
| Nagaland | Ladakh |
| Odisha | Lakshadweep |
| Pondicherry | Rajasthan |
| Punjab | Uttar Pradesh |
| Sikkim | Uttarakhand |
| Tamil Nadu | |
| Telangana | |
| Tripura | |
| West Bengal |
The Commercial Taxes Department of a state/union territory is the nodal agency that collects professional tax on the basis of predetermined tax slabs which vary for each state and union territory. The tax is calculated on the annual taxable income of the individual; however, it can be paid either annually or monthly.
What are the Exemptions in professional tax?
- Any person having a mental or physical disability
- Parents of a child with a disability
- Temporary factory workers
- State-employed foreign individual
- Any individual aged 65 years or older
- Individuals running educational institutions
- Employees of force (Governed by Army, Air Force, Navy Act)
Professional Tax Rates in Different States of India
Professional tax slab for few states
The professional tax rate on salary in Gujarat
| Monthly Gross Salary | Professional Tax |
|---|---|
| Up to 12000 | Nil |
| ₹12000 and above | ₹200 Per month |
The professional tax rate on salary in Andhra Pradesh
| Monthly Gross Salary | Professional Tax |
|---|---|
| Up to ₹ 15000 | Nil |
| ₹ 15,001 to ₹ 20,000 | ₹ 150 per month |
| ₹ 20,000 and above | ₹ 200 per month |
The professional tax rate on salary in Bihar
| Annual Salary | Professional Tax |
|---|---|
| Up to ₹ 3,00,000 | Nil |
| ₹ 3,00,001 to ₹ 5,00,000 | ₹ 1000 per month |
| ₹ 5,00,001 to ₹ 10,00,000 | ₹ 2000 per month |
| ₹ 10,00,001 and above | ₹ 2500 per month |
The professional tax rate in Karnataka
| Monthly Gross Salary | Professional Tax |
|---|---|
| ₹ 1 to ₹ 9,999 | Nil |
| ₹ 10,000 – ₹ 14,999 | Nil |
| ₹ 15,000 and above | ₹ 200 per month |
The professional tax rate in Kerala
| Half year Salary | Professional Tax half yearly |
|---|---|
| Up to ₹ 11,999 | Nil |
| ₹ 12,000 to ₹ 17,999 | ₹ 120 |
| ₹ 18,000 to ₹ 29,999 | ₹ 180 |
| ₹ 30,000 to ₹ 44,999 | ₹ 300 |
| ₹ 45,000 to ₹ 59,999 | ₹ 450 |
| ₹ 60,000 to ₹ 74,999 | ₹ 600 |
| ₹ 75,000 to ₹ 99,999 | ₹ 750 |
| ₹ 1,00,000 to ₹ 1,24,999 | ₹ 1000 |
| ₹ 1,25,000 and above | ₹ 1250 |
Documents required for Professional Tax Registration
Procedure for Obtaining Professional Tax Registration Certificate
Penalties Related To Professional Tax Registration
| Nature of default | Penalty Leviable |
|---|---|
| Not obtaining PT registration | Rs.5/- per day |
| Late filing of PT return | Rs.1,000/- |
| Late payment of PT dues | Interest @1.25% p.m. Penalty @10% |
FAQs
Is professional tax mandatory for sole proprietorship?
Employer (Pvt./Public company, sole proprietorship, partnership firm) or any individual carrying on profession/trade or being a freelancer required to pay professional tax for his trade/profession.
Is professional tax part of TDS?
Professional tax is not a part of TDS. Professional tax is a state tax levied on all kinds of professions, trades, and employment based on the income of such profession, trade, and employment. However, TDS can be considered an advance on your tax paid by the deductor in advance on your behalf.
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