1. What is professional tax?

The State levies this tax on the income earned through profession, trade, calling, or employment, based on slab rates depending on the individual’s income. The State Government collects this tax, similar to Income Tax, while the Central Government collects Income Tax. Additionally, taxpayers are allowed to deduct any amount paid as Profession Tax.

2. Who should pay?

Suppose you are a salaried person working with an employer. In that case, the employer deducts professional tax from your monthly salary and pays the state government.

Self-employed persons (for example freelancers) are also liable to pay tax by themselves by registering for it by applying through a form. Once you obtain the form, a registration number will be issued to the individual. Payment of the professional tax can be made under these registration numbers at banks.

3. What is the limit?

The professional tax was introduced in 1949 and the limit was Rs.250. It was raised to Rs.2500 in the year 1988 and the maximum amount that can be levied by any State is Rs. 2,500 only.

4. Penalties for Non-Compliance on Professional Tax Payment

The amount of penalty may differ from state to state.

For example in the state of Maharashtra:

• Delays in obtaining a Registration Certificate, a penalty of Rs. 5/- per day.
• In case of non/late payment of professional tax, the penalty will be 10% of the amount of tax.
• Filing the returns after the due date will result in a penalty of Rs. 1000 per return within 1 month. Subsequently, After 1 month, the authorities will impose a fine of Rs. 2000.

5. Professional tax slabs in various states

To know the states where professional tax is applicable/not applicable and to calculate professional tax – Professional Tax Slabs.

6. Professional Tax Exemptions

Following are the exemptions

• Parent or guardian of a physically challenged or mentally retarded child.
• A person suffering 40 percent or more of permanent physical disability or blindness.
• An assessee has completed 65 years of age. For the state of Karnataka, it is 60 years

Note: The above provisions can vary in different states.

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