Do you need to pay professional tax under the Professional Tax Rules? Know all about it here.

You must pay professional tax if you earn a regular salary and are employed.

pay professional tax

The Professional Tax Rules say that all salaried employees must pay professional tax. You might have come across this term on your salary slips. It is mentioned under the HRA, allowance, and gross salary. Professional tax for employees is deducted from the gross salary along with EPF, TDS, and other deductions. However, only professionals don't need to pay for it. All salaried individuals are required to pay professional taxes. 

What is Professional Tax?

Your employer should deduct Professional Tax (PT) from your gross salary. It is a direct tax. The tax varies according to the state, and the maximum limit of Professional Tax (PT) is Rs. 2,500. Professional tax for employees is based upon slabs which vary from state to state. The tax applies in states like Gujarat, Maharashtra, Andhra Pradesh, etc. 

Professional Tax Applicability

The following are required to pay PT: 

  • Clubs
  • Architects
  • Engineers
  • HUF
  • Corporations
  • LLPs
  • Business Firms
  • Companies
  • Co-Op societies
  • Associations
  • Legal practitioners
  • Contractors
  • Medical practitioners
  • Tax consultants
  • CS
  • CA
  • Insurance agents
  • Surveyors

How does Professional Tax Work?

You calculate professional tax for employees through a formula like any other direct tax. The union territory or state decides the slab rate. The Constitution allows the Parliament, through Article 246, to frame laws on income tax. However, the state can make the professional tax for employees optional in our country. The professional tax is deducted from the taxable income, and most union territories and states levy it as a source of revenue. The Commercial Tax Department of a state collects professional tax for employees. 

Who Will Collect and Pay Professional Tax?

The employer must collect and pay professional tax for employees according to the rate slab set by their State Government. The employer is also responsible for obtaining and registering professional tax registration certificates. Even freelancers are covered under this.  

Professional Tax Limit For Employees

The maximum professional tax a State can levy is Rs. 2,500. 

How Can You Pay Professional Tax?

The payment mode varies from state to state as it is not a central government-levied tax. However, in most cases, you can pay professional tax offline and online. Visit your state's official website to pay professional tax. 

Who is exempted from paying the Professional Tax (PT)?

Some individuals are exempted from paying professional tax under the Professional Tax Rules. They are: 

  1. Parents of such children with a mental or permanent disability. 
  2. Seniors above 65
  3. Guardians of individuals with a mental disability
  4. Individuals that have a permanent physical disability
  5. Mahila Pradhan Kshetriya Bachat Yojana or Director of Small Savings women agents.
  6. Badli workers
  7. Members of the forces

Every state has penalties if one fails to register and pay on time. For instance, you would have to pay Rs. 5 each day beyond the due date. An interest of 1.25% is also levied monthly in cases of late payment. There is a penalty amounting to 10% if there is a delay/non-payment. A late return filing will attract Rs. 1,000 to Rs. 2,000 penalties. 

The Professional Tax Rules say that all salaried employees must pay professional tax. You might have come across this term on your salary slips. It is mentioned under the HRA, allowance, and gross salary. Professional tax for employees is deducted from the gross salary along with EPF, TDS, and other deductions. However, only professionals don't need to pay for it. All salaried individuals are required to pay professional taxes. 

What is Professional Tax?

Your employer should deduct Professional Tax (PT) from your gross salary. It is a direct tax. The tax varies according to the state, and the maximum limit of Professional Tax (PT) is Rs. 2,500. Professional tax for employees is based upon slabs which vary from state to state. The tax applies in states like Gujarat, Maharashtra, Andhra Pradesh, etc. 

Professional Tax Applicability

The following are required to pay PT: 

  • Clubs
  • Architects
  • Engineers
  • HUF
  • Corporations
  • LLPs
  • Business Firms
  • Companies
  • Co-Op societies
  • Associations
  • Legal practitioners
  • Contractors
  • Medical practitioners
  • Tax consultants
  • CS
  • CA
  • Insurance agents
  • Surveyors

How does Professional Tax Work?

You calculate professional tax for employees through a formula like any other direct tax. The union territory or state decides the slab rate. The Constitution allows the Parliament, through Article 246, to frame laws on income tax. However, the state can make the professional tax for employees optional in our country. The professional tax is deducted from the taxable income, and most union territories and states levy it as a source of revenue. The Commercial Tax Department of a state collects professional tax for employees. 

Who Will Collect and Pay Professional Tax?

The employer must collect and pay professional tax for employees according to the rate slab set by their State Government. The employer is also responsible for obtaining and registering professional tax registration certificates. Even freelancers are covered under this.  

Professional Tax Limit For Employees

The maximum professional tax a State can levy is Rs. 2,500. 

How Can You Pay Professional Tax?

The payment mode varies from state to state as it is not a central government-levied tax. However, in most cases, you can pay professional tax offline and online. Visit your state's official website to pay professional tax. 

Who is exempted from paying the Professional Tax (PT)?

Some individuals are exempted from paying professional tax under the Professional Tax Rules. They are: 

  1. Parents of such children with a mental or permanent disability. 
  2. Seniors above 65
  3. Guardians of individuals with a mental disability
  4. Individuals that have a permanent physical disability
  5. Mahila Pradhan Kshetriya Bachat Yojana or Director of Small Savings women agents.
  6. Badli workers
  7. Members of the forces

Every state has penalties if one fails to register and pay on time. For instance, you would have to pay Rs. 5 each day beyond the due date. An interest of 1.25% is also levied monthly in cases of late payment. There is a penalty amounting to 10% if there is a delay/non-payment. A late return filing will attract Rs. 1,000 to Rs. 2,000 penalties. 

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