written by Khatabook | July 19, 2021

Professional Tax- Understanding Tax Slab Rates, Its Application and Exemption Process

Have you paid close attention to your salary statement? If yes, you would have come across a component which is termed as “Professional Tax”. This component does not get missed, especially if you are working in the private sector. Over the years, the professional tax deduction has become an integral part of all payslips. Regardless of your pay or the role you engage in - the tax component will be deducted. 

So, what is professional tax? How does it make a difference in your take-home? Also, why is it deducted from everybody’s paycheck? If these questions are in your mind, the next few lines will make sense to you. 

What Is Professional Tax?

First things first, this tax component is introduced by the state government. This means the amount goes towards the government of the state you are currently working in. 

  • The tax is imposed on any individual who makes an income. It does not depend on the source or medium of the income. 
  • This means engineers, lawyers, and anyone with a source of income will be asked to pay the professional tax. 
  • Of course, you must not mistake the term professionals with vocations like Doctors. People often believe that professional taxes are only meant for doctors and other professionals. 
  • Well, in reality, it applies to “everyone”. The method used to calculate a person’s professional tax deduction depends on the state. 

For example, the method used by Karnataka will be completely different from the strategy followed by Maharashtra. Nevertheless, the tax figure cannot exceed 2500. This is the upper limit of tax anyone would be asked to pay in this category. 

Why does Professional Tax Deduction Differ?

Now, you might ask why the professional tax amount differs from one individual to another. Interestingly, multiple factors are taken into consideration before the final amount is decided. 

  1. One of the most common reasons why the tax amount differs would be the state. As mentioned previously, the amount depends on the state. Hence, the method used to compute the amount varies. As a result, the amount paid by each individual differs.
  2. There are slabs to estimate the amount a person needs to pay. Once again, the professional tax slab is defined by the state. 
  3. The mode of payment is common across states and individuals. The total value is divided neatly by 12. This means an individual will pay twelve equal instalments. However, the amount you pay in February will be slightly higher than the other months. A reason behind this would be the number of days in February (it is always a day or two less). 
  4. In some cases, people may have a different source of income. This means the money made would fall under a different category. Within the other category, a different type of tax could be levied. Let’s understand this with an example. You could be someone owning a transportation business. In this sector, you may be asked to pay Rs 50 for every vehicle you own and operate. The tax cap for vehicles is as high as Rs 1000.

When Is The Professional Tax Collected?

Unlike many other tax returns or payments - professional tax is collected every month. This means you will see this tax component every month. It would be impossible to see a paycheck without the tax. For instance, if an organisation does not pay professional tax, the government will impose a fine on them. 

If you are not an employee of a “company” but are self-employed, the tax still needs to be paid. In these situations, you need to take the burden of paying tax yourself. Once again, those who fail to pay professional tax will receive penalties. Unlike the other category, you can choose to pay in a lump sum or monthly. 

How Do Self-employed Professionals Pay Professional Tax?

Self-employed professionals need to pay the p tax. Nearly all state government authorities neatly document the steps for paying professional tax. 

However, here is a simple guide to help you:

  1. First, the individual has to apply for the application form and register. 
  2. When the application form is issued, the applicant will receive a registration number. The registration number will be unique to the applicant.
  3. With this registration number, one can pay professional tax at any bank. 
  4. If you choose to pay the amount in a lump sum, you may receive rebates. This depends on the state and its regulations. Hence, you should try to understand the terms and conditions in your state. 

Also Read: Advance Tax in India

How To Fill The Professional Tax Application Form

Now you can secure the application form for paying professional tax online. This makes the entire process much simpler. Here is a guide on how to fill this application:

  1. Navigate to the official site of Professional Taxes (http://pt.kar.nic.in) for the state of Karnataka.
  2. Navigate to the sidebar (left), and click on “Enrollment Application”. This will guide you to a new page.
  3. Click on “New” if you are paying the tax for the very first time. If you have paid the tax using this method before, click on “Enrolled”. 
  4. Enter the class of person, the professional tax office, business status, financial year and the type of return.
  5. Click on Next.
  6. You will be asked for a few more details. 
  7. The last step is to make payment. Often, the site supports credit cards, debit cards and net banking. 
  8. Upon completion of payment, you will receive a receipt. This receipt can be downloaded and saved.

Who Needs To Pay Professional Tax?

Another common question raised around professional tax would be: who needs to pay? The following list speaks about professional tax applicability. Everyone in this list would see the calculation of professional tax in their monthly take home.

  1. Clubs
  2. Companies
  3. Firms
  4. Societies
  5. Corporations
  6. Engineers
  7. Architects
  8. Contractors 
  9. HUF
  10. Associations
  11. Surveyors
  12. Chartered accountants
  13. Tax consultants 
  14. Management consultants 
  15. Solicitors (legal practitioners)
  16. Insurance agents
  17. Medical professionals like doctors, dentists and nurses

The p tax slab for each of these professionals differs. As mentioned above, you need to bear in mind that the state government imposes the rules. Hence, it would help if you read about your state’s regulations to determine the p.tax slab you would fall in. 

Professional Tax Across States

Now, let’s try to understand the tax levied across states. In this post, we have chosen eight different states to describe how to calculate professional tax on salary

Maharashtra

  • Men with a salary up to 7500 are not expected to pay any professional tax.
  • Women with an income up to Rs 10000 are not levied any professional tax. 
  • However, men who make an income between 7501 and 10000 will be charged a professional tax of 175. 
  • Men (and women) who make more than 10000 will pay 200 for 12 months, and 300 in the last month.

Karnataka

  • The professional tax slab is computed with a simple rule. 
  • Employees who make less than Rs 15,000 are not expected to pay any professional tax. 
  • However, anyone who makes more than Rs 15,000 has to pay Rs 200 every month. 

West Bengal

  • People with an income up to Rs 10,000 don’t have to pay any professional tax. 
  • However, individuals with an income between Rs 10,001 and Rs 15,000 need to pay Rs 110.
  • Individuals with an income between Rs 15,001 and Rs 25,000 need to pay a professional tax of Rs 130. 
  • Individuals with an income between Rs 25,001 and Rs 40,000 have to pay a professional tax of Rs 150. 
  • Anyone with an income above Rs 40,000 has to pay Rs 200.

Madhya Pradesh

  • Individuals with an income up to Rs 18,750 don’t have to pay “any” tax. 
  • However, individuals with an income between Rs 18,751 and Rs 25,000 have to pay a tax of Rs 125. 
  • Individuals with an income between Rs 25,001 and Rs 33,333 have to pay a tax of Rs 167. 
  • Anyone with an income above Rs 33,334 will have to pay Rs 208 for 12 months and Rs 212 in the last month. 

Tamil Nadu

  • Professional tax deduction from salary is rather lengthy because of the different rules and regulations in the city. 
  • People with an income up to Rs 3500 don’t have to pay tax. 
  • However, individuals with an income between Rs 3501 and Rs 5000 need to pay a tax of Rs 22.5. 
  • Individuals who make between Rs 5001 and Rs 7500 have to pay Rs 52.5. 
  • Individuals who make between Rs 7501 and Rs 10,000 need to pay Rs 115. 
  • Individuals who make between Rs 10,001 and Rs 12,500 have to pay a professional tax of  Rs 171. 
  • Anyone who makes more than Rs 12,501 needs to pay a professional tax of Rs 208. 

Andhra Pradesh

  • Individuals with an income up to Rs 15,000 don’t have to pay any professional tax. 
  • However, between Rs 15,001 and Rs 20,000, a professional tax of Rs 150 needs to be paid every month. 
  • Beyond Rs 25,000, individuals have to pay Rs 200. 

Gujarat

  • People with an income up to Rs 6,000 don’t have to pay any professional tax. 
  • However, individuals who make an income between Rs 6,000 and Rs 9,000 have to pay Rs 80. 
  • Individuals who make an income between 9,000 and Rs 12,000 should pay Rs 150. 
  • Those who make more than Rs 12000 should pay a professional tax of Rs 200.

Odisha

  • Professional tax calculation is the simplest in this city. 
  • Individuals with an income up to Rs 13,304 don’t have to pay any tax. 
  • However, individuals who earn between Rs 13,305 and Rs 25,000 have to pay Rs 125. 
  • Individuals who earn more than Rs 25,000 will have to pay Rs 200 for 12 months and Rs 300 in the last month.

Few Exemptions to Professional Tax

Now, it is important to understand that some people are not expected to pay professional tax. Here is a quick guide for such individuals:

  1. If a person is running an educational institution that teaches students upto the 12th grade, they are not expected to pay any professional tax. 
  2. Anyone who works for the Central Para Military Force (i.e. CPMF) does not pay this tax.
  3. Individuals who have children, and if one has undergone the sterilization operation. Nevertheless, these parents need to prove all the proofs of the document. The state body has a list of documents that need to be submitted by the parents. 
  4. If the individual were an ex-serviceman, they would not need to pay either.
  5. If the individual is disabled, they can refrain from paying the professional tax. To be more precise, any individual with at least 40-percent disability can choose not to pay the tax. Once again, they need to provide all relevant certificates. 
  6. If a person has received a three-wheeler permit, carrying goods or a taxi, they don't have to worry about professional tax slab rates. 
  7. Individuals who are deaf, dumb or blind, but with a working income don’t fall within any professional tax payment slab.
  8. Combatant members and civilian non-combatants who were once an integral part of the Army Force don’t need to pay professional tax. However, you must bear in mind that these individuals need to abide by the Army Act. The Army Act controls the policies the Armed Forces need to follow.
  9. When the state employs technicians from another country, they don’t have to pay the regional professional tax.
  10. Charitable hospitals and philanthropic missions that are located at the taluk level can refrain from paying professional tax. 

Also Read: Income Tax in India: Basics, Slabs and E-filing Process 2021

Conclusion

We hope this article has helped you in understanding all about professional tax and professional tax calculation. However, as professional tax is a state-level tax, it varies from state to state. Therefore, check the professional tax charged by your state for clarity on the specifics of the tax. 

FAQs 

1. Where can I get common queries on Professional Tax solved?

  • If you have any additional queries on professional tax, you must reach out to the control room at 080-22252258, 080-22342689 or 080-22208401. 
  • Upon contact, an official will help you with the answers you are searching for. The number quoted above is meant for people from the state of Karnataka. 
  • You can also always search for control rooms that are specific to your state.

2. Why does the professional tax have to be different across states?

As mentioned above, the professional tax is collected by the state government. This gives it a reason to be unique and different across states. Every state defines its own slabs. This is why there are differences from one state to another.

3. Why are Union Territories exempt from Professional Tax?

Union Territories are relatively small. And, these regions are controlled by the Central Government. When compared to other regions, the union territories tend to generate low revenues. As a result, they can be exempt from paying professional tax

 

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