Many salaried employees might be very well aware of the term ‘professional tax’ as it would
have been mentioned in the payslips/Form 16 issued to them. But all of them may or may not understand
what it is and why is it appearing in their payslips/Form 16 as a deduction from their salary income.
Hence, this article is an attempt to provide a better picture of what is ‘Professional tax’
and why is it deducted and is it only salaried class who are bearing it.
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.
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 the 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.