Professional Tax

What is a Professional Tax (PT)?

Professional Tax, also called P-Tax or PT, is a tax that is levied by state governments in India on income earned by individuals through employment, profession, or trade. It applies to salaried employees, freelancers, professionals (like doctors, lawyers, etc.), and business owners.

Key Features of Professional Tax:

• The amount of professional tax varies from state to state, as each state has the authority to set its own rules. 

• Some states and Union Territories (UTs) do not choose to levy a P-Tax on salary. 

• Typically, it is deducted from an employee’s salary by the employer and then paid to the government.

• The professional tax payment is usually a small, fixed amount, and generally the maximum annual limit is not more than ₹2,500.

• An Income Tax Calculator can help you calculate your taxable income accurately, taking professional tax into account.

NOTE: Timely filing of professional tax returns is essential to avoid penalties.

• You can avail of the tax benefits under Section 16(iii) only with Old Tax Regime (Not new tax regime) for the professional tax paid for FY 2024-25.

What is the Professional Tax Rate in India?

The professional tax rate in India varies by state, as each state sets its own rates and rules. The professional tax slab and P-tax rate for the 10 popular states are listed below:

1. Professional Tax in Andhra Pradesh:

   The professional tax in AP is up to a maximum of ₹200 per month.

   AP Professional Tax Slab (₹)	PT Amount	Remarks
   PT ≤ ₹15000 per month	₹0.00	Nil
   ₹15001 ≤ PT ≤ ₹20000 per month	₹150.00 per month	Nil
   ₹20001 ≤ PT per month	₹200.00 per month	Nil

2. Professional Tax in West Bengal

   The WB Professional Tax is levied on salaried employees, professionals, and traders, with rates based on income slabs.

   WB Professional Tax Slab (₹)	PT Amount	Remarks
   ₹1,501 ≤ PT ≤ ₹2,001	₹18 per month	Nil
   ₹2,001 ≤ PT ≤ ₹3,001	₹25 per month	Nil
   ₹3,001 ≤ PT ≤ ₹5,001	₹30 per month	Nil
   ₹5,001 ≤ PT ≤ ₹6,001	₹40 per month	Nil
   ₹6,001 ≤ PT ≤ ₹7,001	₹45 per month	Nil
   ₹7,001 ≤ PT ≤ ₹8,001	₹50 per month	Nil
   ₹8,001 ≤ PT ≤ ₹9,001	₹90 per month	Nil
   ₹9,001 ≤ PT ≤ ₹15,001	₹110 per month	Nil
   ₹15,001 ≤ PT ₹25001	₹130 per month	Nil
   ₹25001 ≤ PT ≤ ₹40001	₹150 per month	Nil
   ₹40001 ≤ PT	₹200 per month	Nil

3. Professional Tax in Karnataka

   The Karnataka professional tax payment applies to individuals earning over ₹24,999 per month, with a maximum monthly limit of ₹200.

   KR Professional Tax Slab (₹)	PT Amount	Remarks
   ₹24999 ≤ PT per month	₹ 200.00 per month	Nil

4. Professional Tax in Maharashtra

   The Maharashtra PT payment is imposed on professionals and employees, with rates ranging from ₹175 to ₹300 per month based on income.

   MH Professional Tax Slab (₹)	PT Amount	Remarks
   PT ≤ ₹7500 per month	₹ 0.00	Nil for Male Employees
   ₹7501 ≤ PT ≤ ₹10000 per month	₹ 175 per month	For Male Employees
   ₹10000 ≤ PT per month	₹ 200 per month	For Male Employees
   ₹10000 ≤ PT per month	₹ 300 per month	Only for Male Employees; the employer deducts the P-tax in February month.
   ₹25000 ≤ PT per month	₹ 0.00	Nil for Female Employees
   ₹25000 ≤ PT per month	₹ 200 per month	For Female Employees
   ₹25000 ≤ PT per month	₹ 300 per month	Only for Female Employees; the employer deducts the P-tax in February month.

   

5. Professional Tax in Jharkhand

   The Jharkhand professional tax is applicable to salaried employees and professionals earning above ₹3,00,000 annually.

   JH Professional Tax Slab (₹)	PT Amount	Remarks
   PT ≤ ₹300000 per annum	₹ 0.00	Nil
   ₹300001 ≤ PT ≤ ₹500000 per annum	₹ 1200 per annum	Nil
   ₹500001 ≤ PT ≤ ₹800000 per annum	₹ 1800 per annum	Nil
   ₹800001 ≤ PT ≤ ₹1000000 per annum	₹ 2100 per annum	Nil
   ₹1000001 ≤ PT  per annum	₹ 2500 per annum	Nil

6. Professional Tax in Telangana

   The Telangana PT payment is collected from employees and professionals, with rates up to ₹200 per year based on income.

   Telangana Professional Tax Slab (₹)	PT Amount	Remarks
   PT ≤ ₹15000 per month	₹ 0.00	Nil
   ₹15001 ≤ PT ≤ ₹20000 per month	₹ 150.00 per month	Nil
   ₹20000 < PT per month	₹ 200.00 per month	Nil

7. Professional Tax in Odisha

   The Odisha PT payment is imposed on professionals earning above ₹1,60,000 per month, with rates capped at ₹2,400 per year.

   Odisha Professional Tax Slab (₹)	PT Amount	Remarks
   PT ≤ ₹160000 per annum	₹ 0.00	Nil
   ₹160001 ≤ PT ≤ ₹300000 per annum	₹ 1500.00	Monthly Rs. 125
   ₹300001 ≤ PT per annum	₹ 2400.00	Monthly Rs.200/- (Apr to Feb, which will be paid in subsequent months. For the month of March Rs. 300 to be paid in April)

8. Professional Tax in Kerala

   The Kerala P-Tax is charged on individuals earning above ₹11,999 per month, with annual rates up to ₹1,250.

   Kerala Professional Tax Slab (₹)	PT Amount	Remarks
   PT ≤ ₹11999 half-yearly	₹ 0.00	Nil
   ₹12000 ≤ PT ≤ ₹17999 half-yearly	₹ 320.00 half-yearly	Nil
   ₹18000 ≤ PT ≤ ₹29999 half-yearly	₹ 450.00 half-yearly	Nil
   ₹30000 ≤ PT ≤ ₹44999 half-yearly	₹ 600.00 half-yearly	Nil
   ₹45000 ≤ PT ≤ ₹99999 half-yearly	₹ 750.00 half-yearly	Nil
   ₹100000 ≤ PT ≤ ₹124999 half-yearly	₹ 1000.00 half-yearly	Nil
   ₹125000 ≤ PT half-yearly	₹ 1250.00 half-yearly	Nil

9. Professional Tax in Gujarat

   The GJ professional tax is levied on salaried individuals and professionals earning above ₹12,000 per month, with a maximum limit of ₹200 per month.

   GJ Professional Tax Slab (₹)	PT Amount	Remarks
   PT ≤ ₹12000 per month	₹ 0.00	Nil
   ₹12000 ≤ PT per month	₹ 200 per month	Nil

10. Professional Tax in Assam

    The Assam PT payment is imposed on professionals and employees, with rates based on income slabs above ₹10,000 annually.

    AS Professional Tax Slab (₹)	PT Amount	Remarks
    PT ≤ ₹10000 per month	₹ 0.00	Nil
    ₹10001 ≤ PT ≤ ₹15000 per month	₹ 150.00 per month	Nil
    ₹15001 ≤ PT ≤ ₹25000 per month	₹ 180.00 per month	Nil
    ₹25001 ≤ PT per month	₹ 208.00 per month	Nil

Tax Benefits on Professional Tax under Section 16(iii)

Salaried employees can claim a deduction from their taxable income for the professional tax paid during the financial year under Section 16(iii):

• Maximum Deduction: Allowed up to the actual amount of professional tax paid during the financial year.

• Employer Deduction: Employers may also deduct the professional tax they pay on behalf of employees, reducing the employee’s taxable income.

• New Tax Regime Note: Deduction available only under the old tax regime, not in the new tax regime. Use an old vs. new tax regime calculator to compare tax savings, factoring in deductions and exemptions specific to each regime.

Who Makes Professional Tax Regulations in India?

In India, professional tax regulations are made by the state governments in India. Each state has the authority to set its own rules, rates, and collection methods for professional tax. This is why the amount and rules for professional tax can differ from one state to another.

The central government allows states to levy professional tax through Article 276 of the Constitution of India, but the state governments decide the specific details, such as who needs to pay, how much, and how often it is collected.

Who Levies and Collects the Professional Tax?

1. State Governments Levy the Professional Tax (PT) in India:

   • The professional tax is primarily imposed by individual state governments in India.

   • Each state has the authority to set its own rates and regulations regarding the tax.

2. Local Authorities Collect the Professional Tax (PT):

   • The collection of professional tax is handled by local municipal bodies.

   • These bodies may include municipal corporations, municipalities, and panchayats.

NOTE:

• Some states require payment only from individuals earning above a specific income level.

• Certain individuals, such as senior citizens and persons with disabilities, may be exempt from paying professional tax based on state rules.

Who Should Pay a Professional Tax?

The following categories of taxpayers a applicable for professional tax payment:

• Employed Individuals: Salaried employees have professional tax deducted from their salaries by employers.

• Self-Employed Individuals: Freelancers and consultants are responsible for paying their own professional tax directly to the Income Tax Department.

• Business Owners: Owners of sole proprietorships or partnerships must pay professional tax based on their income.

• Professionals in Various Fields: Professionals like doctors and lawyers must pay professional tax, whether salaried or independent.

Rules for Professional Tax Registration

The following rules must be followed regarding the professional tax registration in India:

• Employers must register for professional tax to deduct and pay it on behalf of employees.

• Self-employed individuals must register directly with their state’s authority.

• Registration rules vary by state, so follow the local regulations.

• Businesses with branches in different states need to register in each state separately.

• Registration must be done within 30 days of hiring employees or starting a business.

• Late registration can lead to fines or penalties.

• Employers must deduct the tax from employees' salaries.

• Businesses with more than 20 employees must pay the tax monthly; those with fewer must pay quarterly.

How to Pay a Professional Tax?

You can follow the steps mentioned below for professional tax payment as per your respective state rules:

• Register with the Tax Department: First, register your business or yourself (if self-employed) with the state’s professional tax department.

• Obtain Professional Tax Registration Certificate (PTRC): After registration, you will receive a PTRC, which authorizes you to deduct and pay professional tax.

• Calculate the Tax Amount: Determine the tax amount based on your income or salary. Each state has its own tax slab rates.

• Log in to the Tax Portal: Go to the state’s official professional tax payment portal and log in with your credentials.

• Fill in Payment Details: Enter the required details like the amount of tax, your PTRC number, and other necessary information.

• Make Payment: Choose your preferred payment method (online banking, card, etc.) and complete the transaction.

• Download Payment Receipt: After payment, download the receipt as proof of payment for future reference.

• File Returns: File professional tax returns as per the state’s guidelines, usually every month or annually.

List of Professional Tax Exemptions

The exemptions in professional tax may vary slightly across states, as P-Tax is a state subject; some of the exemptions are listed below:

• Senior citizens: Individuals aged 65 years and above are exempt.

• Parents of disabled children: If supporting a child with a disability, the individual is exempt.

• Handicapped persons: Individuals with physical or mental disabilities are exempt.

• Armed Forces personnel: Members of the Army, Navy, and Air Force are exempt.

• Women exclusively employed: Some states may provide exemptions to women who are the sole breadwinners.

• Individuals earning below the threshold: People whose income is below the state's taxable limit are exempt.

• People suffering from serious diseases: In some cases, individuals with severe illnesses (e.g., cancer, leprosy) are exempt from professional tax.

• Temporary textile workers: Badli (temporary) workers in the textile industry.

• Charitable hospitals in rural areas: Exemptions for hospitals below taluk level.

• Educators: Individuals running schools or institutions up to the 12th grade.

• Foreign employees: Foreign nationals employed by the state.

What if You Violate the Professional Tax Regulations?

If you violate professional tax regulations in India, here are the possible consequences:

• Penalties: You may be charged a penalty for late payment or non-payment of professional tax. The exact amount depends on the state laws.

• Interest: Interest is often charged on overdue amounts, calculated monthly.

• Legal action: In serious cases, continuous non-compliance can lead to legal action or further penalties.

• Employer's responsibility: Employers are required to deduct and pay professional tax on behalf of employees. Failure to do so can result in penalties for both the employer and employee.

For Example:

Let us take the example of Maharashtra, where professional tax regulations are strictly enforced. 

• Late Payment Penalty: A fine of up to 10% of the unpaid amount.

• Interest on Late Payment: 1.25% per month on the overdue amount.

• Failure to Register: A penalty of ₹5 per day for not registering.

• Late Filing of Returns: A fine of ₹1,000 for delayed itr filing.