In your pay slips you will notice that there is a small deduction mentioned along with all the HRA, conveyance and basic salary break ups. This deduction is generally to the tune of INR 200 or so and is called the professional tax. This tax is generally different for each state and in certain place you may notice that there is no deduction made under this heading. So the question is, what is professional tax?
What is Professional Tax?
The professionals earning an income from salary or other practices such as a lawyer, teacher, doctor, chartered accountant, etc. are required to pay professional tax. In case of salaried and wage earners, the professional tax is liable to be deducted by the employer from the salary/wages and the same is to be deposited to the state government. In case of other class of individuals, this tax is liable to be paid by the employee himself. The tax calculation and amount collected may vary from one state to another, but it has a maximum limit of INR 2500/- per year.
Professional Tax Applicable States Across India:
There are exemptions provided for certain individuals to pay Professional Tax under the Professional Tax Rules.
The following individuals are exempted to pay Professional Tax:
Who is Responsible for Deducting Professional Tax?
The employer is responsible for deducting professional tax from the salaries of his employees and paying the amount so collected to the appropriate state government. An employer has to furnish a return to the tax department in the prescribed form within the specified time along with proof of tax payment.
Professional Tax in India
The maximum amount of Professional Tax that can be imposed by any state in India is INR 2500/-. Total amount of Professional Tax paid during the year is allowed as deduction under the Income Tax Act. The Professional Tax is a source of revenue for the state governments which helps in implementing schemes for the welfare and development of the region. Professional Tax is deducted by the employers from the salary of the salaried employees, and is deposited with the state government. Other individuals, pay it directly to the government or through the local bodies appointed to do so.
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