Decoding Professional Tax: Rates, Applicability & Meaning

Professional tax is mandatory for professionals employed in salaried jobs and self-employed professionals. This tax is listed on your monthly salary slip and deducted from your gross pay, along with other deductions, such as TDS (Tax Deducted at Source) and EPF (Employees' Provident Fund).

It's important to note that professional tax in India applies to all taxpayers, not just those in professional practice. Your tax depends on your income level and the state you work in. So avoid penalties and legal consequences by keeping track of your professional tax payments.

Let us discuss professional tax in detail.
 

Professional Tax: What It Is and Who Pays

Professional tax is a form of tax that the state government levies, which is mandatory for anyone earning a salary or working as a self-employed professional.

The tax calculation involves the income level of the individual. In India, it is usually deducted from the person's salary, similar to other deductions like TDS and EPF.

Professional tax in India applies to all working professionals, including doctors, lawyers, engineers, architects, and accountants. Self-employed professionals, such as freelancers and consultants, must also pay this tax. However, the amount can vary due to the professional tax limit, as each state has tax slab rates.

It is essential to keep track of tax payments and ensure they are made on time. In case of failure to do so, there will be penalties and legal consequences. Stay informed about your professional tax obligations and fulfil them on time to avoid issues. To comply with professional tax obligations, record the professional tax payments and consult a tax expert or accountant to understand the tax laws and regulations.
 
Read More: Tax-Saving Tips for Salaried People in 2023
 

Professional Tax Slab Rates: How Much You'll Pay?

The professional tax slab rates in India vary from state to state. Generally, individuals earning a lower income pay a lower professional tax, while those earning higher incomes pay a higher tax. So the professional tax slab rates are designed to ensure the tax burden is proportional to the payment.

For instance, in Maharashtra, individuals earning a monthly salary of up to Rs 7,500 are exempt from professional tax. Those earning above this amount pay a tax of Rs 175 per month. In contrast, in Tamil Nadu, individuals earning a monthly salary of up to Rs 21,000 are exempt from professional tax, while those earning above this amount pay a tax of Rs 2,500 per year.

It's important to note that some states in India have a minimum threshold income below which professional tax is not applicable. Additionally, some employers may pay professional tax on behalf of their employees. Here is a table of professional tax slab rates in India as of 2022:
 

State	Income Range (per month)	Professional Tax Rate
Maharashtra	Up to INR 7,500	Nil
	INR 7,501 to INR 10,000	INR 175 per month
	INR 10,001 to INR 15,000	INR 350 per month
	INR 15,001 and above	INR 500 per month
Tamil Nadu	Up to INR 21,000	Nil
	INR 21,001 to INR 30,000	INR 138 per month
	INR 30,001 to INR 45,000	INR 276 per month
	INR 45,001 and above	INR 690 per month
Karnataka	Up to INR 15,000	Nil
	INR 15,001 to INR 20,000	INR 200 per month
	INR 20,001 to INR 30,000	INR 250 per month
	INR 30,001 and above	INR 300 per month
West Bengal	Up to INR 8,500	Nil
	INR 8,501 to INR 10,000	INR 90 per month
	INR 10,001 to INR 15,000	INR 110 per month
	INR 15,001 to INR 25,000	INR 130 per month
	INR 25,001 and above	INR 200 per month

Note: The above table is for informational purposes only and may be subject to change.
 

Conclusion

To summarise, professional tax is mandatory for all salaried individuals and self-employed professionals in India. The amount of tax paid depends on the income level and the state of India where the professional works. It is essential to keep track of professional tax payments to avoid penalties and legal consequences.

Just like a person can claim tax benefits on a loan against property used for buying or constructing homes, individuals can avail tax benefits on the personal income tax return by claiming the professional tax paid as a deduction under section 16(iii) of the Income Tax Act.

The professional tax slab rates vary from state to state and are designed to ensure that the tax burden is proportional to the income. Some states have a minimum threshold income below which professional tax is not applicable. Meanwhile, some employers may also choose to pay professional tax on behalf of their employees.