Professional Tax
If you are a working professional, then you would have definitely heard about professional taxes. The term “professional tax” has probably appeared on your pay stubs each month. Below is a breakdown of your gross pay, allowance, and HRA.
Your entire salary is deducted, along with TDS, EPF, and other deductions, from professional tax.
But this tax does not mean that professionals—such as physicians, solicitors, and other professionals—are the only ones subject to it. If you get paid, you could have to pay this tax. Before we go, let’s review what professional tax is.
WHAT IS PROFESSIONAL TAX?
A professional tax is a fee levied by a state government on any individual who obtains income from any source. Despite the name’s potential implication, professional taxation is universal. All types of persons from all other professions, occupations, callings, employment, and trades are represented on the list.
HRA
House Rent Allowance is the full acronym of HRA. It is a portion of your pay that your employer sets aside to cover the cost of your rental property. Only those who live in rental housing are eligible to claim HRA exemptions. The Income Tax Act of 1961’s Rule 2A and Section 10(13A) both address the HRA exemption.
TDS
Before depositing the money in your account and submitting it to the government on your behalf, employers take taxes out of your pay. Tax Deduction at Source, or TDS, is the idea of withholding taxes prior to payment. The Income Tax Act of 1961’s Section 192 addresses TDS on salaries.
EPF
Through the Employee Provident Fund (EPF) programme, you can accumulate wealth while working as a worker for a public or private company. You can utilise this amount, which accrues interest, to finance other objectives or a portion of your post-retirement lifestyle.
The professional tax is displayed on the deductions side of the payslip. 200 Indian rupees, roughly. But state-to-state variations exist. Furthermore, a yearly cap of INR 2,500 per individual has been set. It represents the maximum professional tax that a state government can levy.
The Income Tax Act of 1961’s Section 16(iii) provides that professional tax is deductible. This provision permits an employee to subtract professional tax payments from their gross pay when filing income tax returns.
Anybody who earns income from a profession, trade, or employment is subject to professional tax, which is levied by the state government. This tax is not imposed in every state.
The only states that are exempt from this tax are
- Rajasthan,
- Haryana,
- Arunachal Pradesh
Among the states that apply this tax are
- Karnataka
- Andhra Pradesh
- Madhya Pradesh
- West Bengal
- Telangana
- Maharashtra
- Assam
- Meghalaya
- Tamil Nadu.
WHO COLLECTS PROFESSIONAL TAX?
The Central Government is in charge of the income tax statute. Professional taxation is the province of the states. All earners are subject to direct taxes from the state. While professional tax is handled by state governments, not all states collect it from private citizens.
As per Article 246 of the Indian Constitution, Parliament is the only entity that can pass laws pertaining to income tax. State legislatures have the authority to enact laws about specific taxes, such as the professional tax. Article 276 of the Indian Constitution allows states to pass laws managing this state government tax.
Employers must apply for and receive the two special certificates listed below to pay and charge taxes:
- Professional tax enrollment certificate: This document gives the employer permission to take professional tax from employees’ salaries in order to settle outstanding debts with the state government.
- Professional tax registration certificate: This document attests to the employer’s obligation to pay professional taxes related to their trade or business.
CALCULATION OF PROFESSIONAL TAX ON SALARY.
Numerous internet calculators are currently available, which speed up and improve the accuracy of calculations.
The variables used in professional tax computations are income and state. Since certain states do not impose professional taxes, residents in those states are spared from having to figure this out. This mathematical approach will be easier to understand with the help of the following table.
Professional Tax in Karnataka:
Monthly salary (in Rs.)
Tax(in RS . per month)
- up to RS 14,999
- More Than 15,000
- Nil
- Rs, 200
Professional Tax in Maharashtra:
Monthly salary (in Rs.)
Tax(in RS . per month)
- Up to Rs.7,500 for men
- Up to Rs. 10,000.for women
- Rs.7,501 to Rs.10,000
- Rs. 10,000 and above
- Nil
- Nil
- Rs.175
- Rs.200 for 12 months and Rs. 300 for the last month
Professional Tax in Madhya Pradesh:
Monthly salary (in Rs.)
Tax(in RS . per month)
- Up to Rs. 18,750
- Rs.18.751 to Rs.25,000
- Rs.25,001 to Rs.33,333
- Rs.33,334 and above
- Nil
- Rs.125
- Rs.167
- Rs.208 for 11 months and Rs.212 for the last month
Professional Tax in Tamil Nadu:
Monthly salary (in Rs.)
Tax(in RS . per month)
- Up to Rs.3,500
- Rs.3,500 to Rs.5,000
- Rs.5,001 to Rs.7,500
- Rs.7.501 to Rs. 10,000
- Rs. 10.001 to Rs.12,500
- Above Rs.12.500
- Nil
- Rs.22.5
- Rs.52.5
- Rs.115
- Rs.171
- Rs.208
Professional Tax in Andhra Pradesh:
Monthly salary (in Rs.)
Tax(in RS . per month)
- Up to Rs.15,000
- Rs. 15,001 to Rs.20,000
- Above Rs.20,000
- Nil
- Rs.150
- Rs.200
Professional Tax in Gujarat:
Monthly salary (in Rs.)
Tax(in RS . per month)
- Up to Rs.5,999
- Rs.6.000 to Rs.8.999
- Rs.9,000 to Rs. 11,999
- Rs. 12,000 and above
- Nil
- Rs.80
- Rs.150
- Rs. 200
Professional Tax in Odisha:
Monthly salary (in Rs.)
Tax(in RS . per month)
- Up to Rs.13,304
- Rs.13,305 to Rs.25,000
- Rs.25,001 and above
- Nil
- Rs.125
- Rs.200 for each month except February and Rs. 300 February
WHY IS PROFESSIONAL TAX DIFFERENT IN DIFFERENT STATES?
Given that it is a state-imposed tax, the specifics vary from one state to another.
The professional tax is subtracted in accordance with the slabs that each state declares. Additionally, professional tax is not levied in some states or union territories.
The yearly professional tax liability is paid in twelve equal installments each month, with the exception of February, when the installment is larger than the others.
In certain cases, income from sources that fall within various sectors might potentially be subject to additional taxes.
For instance, in certain states, an individual operating a transportation-related business could have to pay a professional tax, which might have an annual maximum of Rs. 1,000, of approximately Rs. 50 for each car they own.
ELIGIBILITY:
Professional Tax is applied to the following people and organisations:
- Businesses
- Companies
- HUF Associations LLPs Corporation Societies
- Clubs
- Attorneys, including solicitors
- Architects, engineers, contractors, insurance agents, chartered accountants, and computer science surveyors
- Tax advisors
- Consultants for management
- Medical professionals, including physicians, dentists, and medical consultants.
The owner of the business is responsible for deducting this tax from employee wages. They are also responsible for allocating the funds they have raised to the relevant government agency. Additionally, tax payments can be made monthly, semi-annually, or annually, depending on the type of business.
Professional tax returns also need to be filed with the tax authorities after the fiscal year. Professional tax returns (along with proof of tax payment) must be filed in the format specified in advance and within the specified time limit.
EXEMPTIONS :
The following people are exempt from paying professional tax:
- Those in charge of educational establishments that instruct students up to the twelfth grade.
- People who are members of the Central Paramilitary Force (CPMF).
- a single parent who has had a sterilisation procedure. Nonetheless, the necessary paperwork needs to be turned in.
- Any former military personnel covered by SI No. 1 (Schedule)
- Any person with a disability who is at least 40% disabled. Nonetheless, the necessary certificate needs to be turned in.
- those who are authorised to transport things in a single three-wheeler or taxi.
- People who are blind, deaf, or stupid are paid.
- members of the armed forces who are civilians who are not combatants or fighters. Nonetheless, the Armed Forces must be governed under the Army Act.
- International technicians who have been employed by the State.
- Any and all benevolent and philanthropic hospitals located in areas below the taluk level.
STEPS TO FILL THE FORM:
The following are the steps to fill the professional tax application form:
- Visit the official website of Professional Tax i.e. http://pt.kar.nic.in
- Click on ‘Enrolment Application’ on the left-hand side of the page
- Select ‘New’, if you are paying professional tax for the first time
- Select ‘Enrolled’, if you have filed tax returns earlier
- Enter the required details, such as:
- Financial year
- Professional tax office
- Type of return
- Business status
- Class of person
- Click on ‘Next’
- Make the payment through credit card, debit card, or net banking
- Download the receipt after making the payment
If your income surpasses the minimal threshold set by each state that has professional tax in its tax structure, you will be required to pay professional tax. It is deducted right away from the employees’ pay if their employers are registered with the state legislation.
Individuals who engage in several professions must pay professional tax according to the state’s established slabs and rates. The Commercial Tax Department is responsible for collecting this tax and disbursing the funds to the municipal corporation.
Using your ID, tax registration number, and other details from their websites, you can pay this tax online. Failing to register or pay taxes on time might result in a penalty.
