professional tax

Professional Tax is levied and collected by the State Government at various slab rates on every individual who earns his livelihood by the way of profession, trade, calling or employment. It is one such tax which differs from state to state. It is restricted to a maximum limit of ₹ 2,500 and allowed as a deduction under section 16 of the Income Tax Act, 1961.

What is Professional Tax?

Professional tax is a tax levied and collected by the State Government on every single earning individual who earns a living through any medium which can be a profession, trade, calling or employment. However, it should not be mixed with the professionals that means doctors, chartered accountants, lawyers, etc. Clause (2) of Article 276 of the Constitution of India provides the right to the State Government for levy and collection of professional tax or tax on the profession.

As the rights remain with the State Government, certain states do not charge professional tax too. The tax is levied based on the slab rates depending upon the income of the individual. However, the maximum amount any State can levy as Professional Tax is restricted to ₹ 2,500. The amount paid as Professional Tax is allowed as a deduction under section 16 of the Income Tax Act, 1961 and the income tax on the balance amount shall be calculated as per the slabs applicable.

How to Calculate Professional Tax?

You can calculate your Professional Tax liability on the basis of your gross salary and tax slab prescribed by the state government levying Professional Tax. Currently, only 15 states levy the Professional Tax in India. The slab rates differ from state to state.

e.g., in Andhra Pradesh, the Professional Tax rates are as follows:

Gross income up to Rs 15,000 there will be nil tax
For Rs 15,001 to 20,000, it is Rs. 150 per month
For Rs 20,001 and above,it is Rs. 200 per month

Who is liable to pay Professional Tax?

In case of the salaried employees, the professional tax needs to be deducted from the salary by the employer on monthly basis and paid to the state government. If an individual is self-employed or in case he has no employer, the individual himself is liable to pay the professional tax. However, a non-employed individual can register for professional tax by applying through a form. The registration number is issued after successful registration. Professional Tax can be paid under this registration number at various banks.

Income

Save Money

Satisfaction

Penalty for late payment of Professional Tax

In case of delay in obtaining the registration certificate, a penalty of ₹ 5 per day in case of the employer and ₹ 2 per day in case of a non-employed individual shall be imposed.
In case of delay in payment of professional tax, a penalty of 2% per month of the amount of tax shall be levied. However, in case of non-payment of such professional tax, the assessee would attract an additional penalty of 10% of the amount of tax due.
In case of delay in filing the returns, a penalty of ₹ 1,000 shall be charged if the returns are filed within 1 month after the due date. Where the return is not filed even after 1 month post the due date of filing return, the penalty shall be ₹ 2,000.
If the information provided by the individual at the time of enrolment is found incorrect or false, it shall attract the penalty of three times of the professional tax payable.