Professional Tax

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What is Professional Tax?

Professional tax is a tax that is levied by a state government on all individuals who earn a living through any medium. This should not be confused with the definition of professionals that indicates people such as doctors. This is a tax that is to be paid by every single earning individual. The calculation and amount collected may differ from one state to another but it has a limit of Rs. 2500 per year.

Why is it different for different people?

Since it is a tax that is levied by the state government, it tends to differ from one state to another. Each state has a slab that it declares and the professional tax is deducted based on these slabs. Some states and union territories do not charge professional tax too. How it is paid is by dividing the annual professional tax due into 12 equal installments that are paid every month, except the one paid in February which is higher than the other months.

There may also be situations where sources of income falling under different sectors will also be liable for a separate tax. For example, in some states, a person running a business in the transport sector may be required to pay a professional tax of about Rs. 50 per annum for each of the vehicles owned and it may be subject to a cap of Rs.1,000 per annum.

Who Collects Professional Tax?

Professional tax is collected by the employers from the monthly salaries. It is then paid by them to the government failing which they can have penalties imposed on them for not collecting or failing to pay the professional tax. If you are not working for anyone then you are liable to pay the professional tax yourself.

For professionals not working with an employer they can register for it by applying through a form. Once the form is received, a registration number will be issue to the individual. Payment of the professional tax can be made under these registration numbers at banks. It is also worth noting that, in some states, the government also provides rebates on taxes if it is paid in a lump sum for a few years together so it is worth enquiring about the rules of professional tax in your state.

Professional Tax Applicability

Professional Tax is applicable for the below-mentioned individuals and entities:

  • Companies
  • Firms
  • LLPs
  • Corporation
  • Societies
  • HUF
  • Associations
  • Clubs
  • Legal practitioners such as solicitors
  • Contractors
  • Architects
  • Engineers
  • Insurance agents
  • Chartered Accountants
  • CS
  • Surveyors
  • Tax consultants
  • Management consultants
  • Medical representatives such as doctors, medical consultants, and dentists