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Every salaried individual, working and earning a monthly income, is liable to pay a certain part of his/her earnings to the respective state governments in the form of professional tax. This tax, often referred to as P tax, is reflected in an individual’s salary slip as well. An employer directly deducts this tax amount from an employee’s monthly income before handing out the remuneration. 

Professional Tax Applicability

Since the state governments decide the quantum of this taxation, it tends to differ between the various states in India. Therefore, an individual employed in Gujarat will not pay the same amount as professional tax as another person employed in Maharashtra.

Self-employed individuals, such as chartered accountants, doctors, lawyers and others also need to bear the professional tax. However, in these cases, the professionals will need to clear their tax liabilities on their own. The tax rate applied depends on the individual’s income and state of practice.

What is the Professional Income Tax Limit?

Professional tax was introduced in 1949. At that time, the limit for this tax was set at Rs.250. However, in 1988, the limit was increased Rs.2500. The exact liability, however, depends on the employee’s income slab and state of employment. However, regardless of these two factors, professional tax for a month cannot exceed Rs.2500.

Who Levies Professional Tax?

Even though Article 276 of the Indian Constitution grants the Parliament to make decisions and laws regarding taxes implemented on an individual’s income, professional tax is an exception to this rule. One must remember that even though all states have the power to levy this tax, not everyone chooses to. 

The following table highlights the states where this particular tax is applicable and where it is not.

States Where P Tax is ApplicableStates (and UTs) Where P Tax Does Not Exist
GujaratJammu & Kashmir
Madhya PradeshUttarakhand
BiharPunjab
JharkhandHaryana
West BengalDelhi
SikkimUttar Pradesh
MeghalayaRajasthan
AssamArunachal Pradesh
TripuraDaman & Diu
NagalandDadra & Nagar Haveli
Manipur Goa
MizoramLakshadweep 
OrissaAndaman & Nicobar Islands
ChhattisgarhHimachal Pradesh
MaharashtraChandigarh
Karnataka
Andhra Pradesh
Telangana
Tamil Nadu
Kerala

Collection of Professional Tax

The Commercial Tax Department is responsible for collecting this tax. Individuals who are employed at a firm or business need not pay this tax separately since it is already deducted by the employer and cleared on behalf of employees. Moreover, if the employer is a person, instead of being an entity, he/she is liable to bear professional taxes on profession or trade as well.

To charge and pay taxes, employers need to register for two specific certificates. These are – 

  1. Professional tax registration certificate – This is a document certifying the employer to pay professional tax on his/her business or trade.
  2. Professional tax enrolment certificate – This is another document that authorises an employer to deduct professional tax from his/her employees for the sole purpose of clearing the liabilities with the state government.

Other certificates and registrations may be necessary as well, depending on the particular state’s legislation and guidelines. However, in some cases, the state may waive off professional tax liabilities for certain categories. For instance, Karnataka exempts all such tax liabilities for blind individuals working and earning within the state.

Paying Professional Tax Online

According to Professions, Trades, Callings and Employments Act of 2000, self-employed individuals, not actively engaged with a third party organisation or firm, also need to bear this tax similar to professional tax for employees. The only difference, in this case, is that the self-employed individuals are responsible for paying this tax on their own.

Doctors, technology expert, chartered accountants, medical professionals and freelancers are some of the self-employed categories who need to pay professional tax where applicable. The first thing that they require to proceed in this respect is a professional tax registration number. After acquiring this number, one can choose to pay professional tax online or offline.

  • Offline method

Taxpayers can visit one of the numerous tax offices and fill up the relevant professional tax form with all their necessary details. Submitting this form, along with the outstanding professional tax amount, clears their liabilities.

  • Online method

One would need to register on the online professional tax portal of the state where the business is located. This should provide the taxpayer with the registration number. Once the details are verified and the certificates issued, individuals can start clearing their professional taxes online. One can pay using debit or credit cards or internet banking.

Using the online portal is more convenient and saves time. One does not need to visit tax offices to pay the sum physically, and simply transfer the outstanding funds with a click of a button.

Penalty for Non-Payment of Professional Tax

An individual or business may have to pay extra if they fail to clear the tax dues on time. The exact penalty varies from one state to the next, but all states impose such fines for late payment. 

Similarly, businesses that fail to register and obtain the professional tax registration certificate and enrolment certificate on time are also penalised. Again, the extent of the penalty is different in every state. 

Lastly, one may need to bear hefty penalties if he/she is found to have misled the state government with incorrect information about the business. Under Section 5(6) of the Profession Tax Act, misinformation in the registration or enrolment certificate can increase an individual’s professional tax burdens by up to three times. Therefore, it is essential to check all your details when applying for one of these professional tax certificates.

Paying Professional Tax in Advance

While one can continue clearing professional tax payments every month, businesses and individuals can also clear these tax liabilities in advance. Doing so can be highly beneficial as some states offer discounts and rebates in such cases. However, to prepay professional taxes, one needs to be extremely familiar with the various slabs of the state where his/her business or employment is located.

  • Maharashtra Professional Tax Slabs
Monthly Income P Tax Deduction Each Month
Up to Rs.7500 for men and up to Rs.10000 for womenNil
Rs.7501-Rs.10000 for menRs.175
More than Rs.10000Rs.200 (Rs.300 in February only)
  • West Bengal Professional Tax Slabs
Monthly IncomeP Tax Deduction Each Month
Up to Rs.8500Nil
Rs.8501-Rs.10000Rs.90
Rs.10001-Rs.15000Rs.110
Rs.15001-Rs.25000Rs.130
Rs.25001-Rs.40000Rs.150
More than Rs.40000Rs.200
  • Tamil Nadu Professional Tax Slabs
Monthly IncomeP Tax Deduction Each Month
Up to Rs.3500Nil
Rs.3501-Rs.5000Rs.16.66
Rs.5001-Rs.9000Rs.40
Rs.9001-Rs.12500Rs.126.67
More than Rs.12500Rs.182.50

These are just the slabs for some of the states where the government levies professional tax. Residents of other states need to determine the slabs followed there to assess their professional tax liabilities effectively.

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