What is the Professional Tax Slab in India?
Many salaried employees know the term ‘professional tax‘. You can find this term appearing on the pay slips. Yet, you may not realize what it is or why it appears as a deduction from your monthly salary. Professional tax isn’t like income tax, yet it’s a crucial component of your taxes. Also, the amount of this tax might differ depending on the state. So let’s check what professional tax is, why it is crucial, who must pay it, and the maximum cap for such taxes.
What is Professional Tax?
Professional tax is a direct tax imposed by the State Government. It is levied on people who earn:
- through the practice of a profession, job, or trade,
- by any profession or through the operation of a freelance business or freelancers.
Per Section 16 (III) of the Income Tax Act of 1961, the state government deducts professional tax. This professional tax is deductible from a taxpayer’s income when filing tax returns.
The general public may believe that this tax applies only to professionals. Yet, this tax applies to all people who generate income. The professional tax will appear in the deduction column of your paycheck. Depending on where you live, the amount deducted could be Rs 200. The highest limit is set at Rs 2,500 per person each year. Further, it is also the highest limit that the State Government may impose.
Note that not all states impose a professional tax. Haryana is among the states that do not impose this tax. Maharashtra does deduct professional tax of Rs 2500 annually.
Who Collects Professional Tax?
The professional tax is submitted to the state governments. For employees, employers deduct a monthly professional tax from their salary. This tax is then paid to the state government. Companies failing to pay taxes will get penalized. It might be for failing to collect the professional tax or to deposit it with the government.
Self-employed people have to pay this tax on their own. They have to register themselves with the state government and fill out a form. Once the concerned authority receives the form, it generates a registration number. Through this, the person can pay professional taxes.
Please note that several states offer a professional tax rebate if the tax paid is in a lump sum for a few years. So, you should know your state-specific regulations.
Professional Tax Slab in Various States
Check the professional tax slabs of different states:
Andhra Pradesh
| Monthly salaries or wages in INR for wage earners | Tax rate in INR per month |
| Up to 15,000 | 0 |
| From 15,001 to 20,000 | 150 |
| Above 20,000 | 200 |
Assam
| Per month wages of wage earners in INR | Tax rate in INR per month |
| Up to 10,000 | NIL |
| From 10,001 to 15,000 | 150 |
| From 15,000 to 25,000 | 180 |
| 25,000 and above | 208 |
Bihar
| Yearly Salary in INR | Annual Tax Rate in INR |
| Up to 3,00,000 | Nil |
| From 3,00,001 to 5,00,000 | 1000 |
| From 5,00,001 to 10,00,000 | 2000 |
| Above 10,00,000 | 2500 |
West Bengal
| Monthly salary (in Rs.) | Tax (per month in Rs.) |
| Up to Rs. 10,000 | Nil |
| Rs. 10,001 to Rs. 15,000 | Rs.110 |
| Rs. 15,001 to Rs. 25,000 | Rs.130 |
| Rs. 25,001 to Rs. 40,000 | Rs.150 |
| More than Rs. 40,000 | Rs.200 |
Odisha
| Monthly salary (in Rs.) | Tax (per month in Rs.) |
| Up to Rs. 1.6 lac | Nil |
| Rs. 1.6 lacs to Rs. 3 lacs | Rs.125 |
| 3 lacs and above | Rs. 200 for 12 months and Rs. 300 for December |
How to Calculate Professional Tax?
In India, each state operates tax services differently. They use a special formula and rates to determine the professional tax payment.
Based on income levels established by the government, the tax is collected. Under Clause (2) of Article 276, the states are given the authority to apply this tax. Any state may impose a tax with a maximum annual value of Rs. 2,500. The lowest slab rate, however, is Rs. 110 per year.
The professional tax must be determined by:
Step 1: Find out whether the professional tax is applicable in the state where you are residing.
Step 2: Based on the income, calculate the tax amount.
Step 3: Review your salary-based tax slab rates.
This gives an estimate of the monthly professional tax deduction.
Who Is Liable to Pay Professional Tax?
Employees who are getting their monthly income have to pay professional tax. Individuals who are involved in trade employment, calling, or any kind of profession are also liable to pay the professional tax. Private, public, or government sector employers who give wages or salaries to their employees are liable to pay this tax.
Individuals Exempted From Professional Tax
The individuals exempted from paying professional tax are as follows:
- Participants in the Central Paramilitary Force (CPMF)
- Ex-servicemen
- Individuals with a 40% disability. They must present the appropriate certification.
- A salary-earning deaf, stupid, or blind person
- Noncombatant or combatant personnel of the Armed Forces who are civilians.
The Process of Filling Out Professional Tax
So this is state-specific. Yet, one may pay professional tax either online or offline. Individuals may need to file professional taxes at specified intervals. Yet, it relies on the state’s rules and regulations.
Effects of Not Filling Professional Tax
Individuals who fail to pay their professional taxes will have to pay penalties. The amount of the fine or the penal interest rate varies from state to state. Also, the State Government can impose penalties for non-registration and late tax filing.
Conclusion
If you are an employee, the employer must file professional taxes. If you are self-employed or an individual, get your tax value computed from a CA and file the taxes on time. Further, individuals must know the respective state’s rules and laws. To avoid penalties, make sure to file taxes on time. To know more about tax slabs, financial solutions like personal loans, and other finance-related information, visit the official website of Piramal Finance.