What is Professional Tax?

Ans – Professional tax is a tax levied at the state level in India. It is collected by the State Government by every individual who earns a living through mediums like trade, employment, or professional. Individuals who practice and earn through profession, such as a Company Secretary, Lawyer, Chartered Accountant, Cost Accountant, Doctor or are a Merchant/ Businessperson are liable to pay professional tax in some states of the country. Professional tax is payable by private company employees or by people who earn a salary in general. The maximum amount any State can levy as Professional Tax is restricted to INR 2,500. The deductions of Professional tax are made under Section 16 of income tax Act, 1961.

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.

Professional tax is calculated on Gross Salary of Individual. Professional tax is levied through predetermined tax slabs and is paid on a monthly Basis. Some of the states which currently impose a professional tax in India are Maharashtra, Gujarat, Andhra Pradesh, Kerala, Tamil

Nadu, Karnataka, Bihar, Assam, Madhya Pradesh, Telangana, Meghalaya, Odisha, West Bengal, Sikkim and Tripura.

Some States and Union Territories where Professional Tax is not applicable Such States are Arunachal Pradesh, Haryana, Himachal Pradesh, Jammu & Kashmir, Punjab, Rajasthan, Nagaland, Uttaranchal, Uttar Pradesh, & Union Territories are Andaman & Nicobar, Chandigarh, Delhi, Pondicherry, Dadra & Nagar Haveli, Lakshadweep, Daman & Diu.