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Professional Tax (PT) is one of the statutory compliance requirements for businesses. Unlike TDS, EPF and ESI, PT is levied by the respective state governments.
But there’s a catch!
Not all Indian states impose a professional tax. Also, the tax applicable to different income slabs may vary from one state to another, but it has a maximum limit of Rs 2,500 per year.
Let’s dig further to know the applicability of professional tax, the states where such tax is applicable, and how RazorpayX Payroll simplifies it for businesses.
What is Professional Tax?
Professional tax is a direct tax that applies to individuals earning an income by way of employment, practising their profession, or trading. A practicing professional includes a lawyer, teacher, doctor, chartered accountant, etc.
The tax is deducted from the individual’s monthly salary by their employer and is deposited to the state governments. Professionals apart from salaried employees pay it directly to the government.
Such professionals can claim a tax deduction for the professional tax paid during the financial year as per the Income Tax Act 1961.
Who is responsible to collect and pay professional tax?
In the case of a salaried employee, the employer must deduct professional tax from their salary every month and deposit it to the government. The employer needs to get a Registration Certificate from the concerned authorities to deposit the deducted tax.
Whereas, the self-employed individuals who carry out their profession or trade and fall into eligibility criteria are required to pay the professional tax themselves to the state government. They need to obtain a Certificate of Enrolment from the concerned state’s prescribed authority.
Every state/UT has a commercial tax department that collects professional tax based on predetermined income slabs.
Professional tax registration and process
All employers must obtain professional tax registration within 30 days of employing individuals. In the case of other professionals, the registration must be obtained within 30 days from the start of their practice.
If the employer has more than one office, then the registration must be obtained for each office depending on the respective state rules.
It might be challenging for employers to catch hold of the registration process of all the states wherever professional tax is applicable.
To ease the complexities of registration processes across states, we built RazorpayX Payroll.
RazorpayX Payroll is an automated payroll software that takes care of everything payroll related right from salary disbursement to getting statutory compliance requirements right. The product also handles professional tax state-wise registrations for employers and saves a lot of valuable time.
Professional Tax slabs in various states
Here’s the list of states where PT is applicable along with the tax amount:
|State||Period of deduction||Income slabs||Tax amount|
|Andhra Pradesh||Monthly||Up to INR 15,000||Nil|
|INR 15,001 to INR 20,000||INR 150|
|More than INR 20,000||INR 200|
|Assam||Monthly||Up to INR 10,000||Nil|
|INR 10,001 to INR 15,000||INR 150|
|INR 15,001 to INR 25,000||INR 180|
|More than INR 25,000||INR 208|
|Bihar||Yearly||Up to INR 3 lakh||Nil|
|Between INR 3 lakh to INR 5 lakh||INR 1,000|
|Between INR 5 lakh to INR 10 lakh||INR 2,000|
|Above INR 10 lakh||INR 2,500|
|Jharkhand||Yearly||Up to INR 3 lakh||Nil|
|Between INR 3 lakh to INR 5 lakh||INR 1,200|
|Between INR 5 lakh to INR 8 lakh||INR 1,800|
|Between INR 8 lakh to INR 10 lakh||INR 2,100|
|Above INR 10 lakh||INR 2,500|
|Gujarat||Monthly||Up to INR 5999||Nil|
|INR 6000 to INR 8999||INR 80|
|INR 9000 to INR 11999||INR 150|
|More than INR 12000||INR 200|
|Karnataka||Monthly||Up to INR 15,000||Nil|
|Above INR 15,000||INR 200|
|Kerala||Half-yearly||Up to INR 11,999||Nil|
|INR 12,000 to INR 17,999||INR 120|
|INR 18,000 to INR 29,999||INR 180|
|INR 30,000 to INR 44,999||INR 300|
|INR 45,000 to INR 59,999||INR 450|
|INR 60,000 to INR 74,999||INR 600|
|INR 75,000 to INR 99,999||INR 750|
|INR 1,00,000 to INR 1,24,999||INR 1,000|
|Above INR 1,25,000||INR 1,250|
|Madhya Pradesh||Monthly||Up to INR 2,25,000||Nil|
|Between INR 2,25,001 to INR 3,00,000||INR 1,500 (INR 125 Per Month)|
|Between INR 3,00,000 to INR 4,00,000||INR 2,000 (INR 166 Per Month For 11 Months And INR 174 For 12th Month)|
|Above INR 4,00,001||INR 2,500 (INR 208 Per Month For 11 Months And INR 212 For 12th Month)|
|Maharashtra||Monthly||Up to INR 7,500||Nil|
|Between Rs 7,501 to Rs 10,000||INR 175 (Nil for women)|
|Above INR 10,000||INR 200|
|INR 300 (Employer has to deduct in the February month only)|
|Manipur||Yearly||Up to INR 50,000||Nil|
|INR 50,000 onwards to Rs 75,000||INR 1,200|
|INR 75,000 onwards to INR 1,00,000||INR 2,000|
|INR 1,00,000 onwards to INR 1,25,000||INR 2,400|
|Above INR 1,25,000||INR 2,500|
|Meghalaya||Yearly||Up to INR 50,000||Nil|
|Between INR 50,001 to INR 75,000||INR 200|
|Between INR 75,001 to INR 1,00,000||INR 300|
|Between INR 1,00,001 to INR 1,50,000||INR 500|
|Between INR 1,50,001 to INR 2,00,000||INR 750|
|Between INR 2,00,001 to INR 2,50,000||INR 1,000|
|Between INR 2,50,001 to INR 3,00,000||INR 1,250|
|Between INR 3,00,001 to INR 3,50,000||INR 1,500|
|Between INR 3,50,001 to INR 4,00,000||INR 1,800|
|Between INR 4,00,001 to INR 4,50,000||INR 2,100|
|Between INR 4,50,001 to INR 5,00,000||INR 2,400|
|Above INR 5,00,001||INR 2,500|
|Mizoram||Monthly||Up to INR 5,000||Nil|
|Between INR 5,001 to INR 8,000||INR 75 (Assessee may pay in lump sum INR 900 per annum)|
|Between INR 8,001 to INR 10,000||INR 120 (Assessee may pay in lump sum INR 1440 per annum)|
|Between INR 10,001 to INR 12,000||INR 150 (Assessee may pay in lump sum INR 1800 per annum)|
|Between INR 12,001 to INR 15,000||INR 180 (Assessee may pay in lump sum INR 2160 per annum)|
|Above INR 15,001||INR 208 (Assessee may pay in lump sum Rs 2500 per annum)|
|Nagaland||Monthly||Up to INR 4,000||Nil|
|Between INR 4,001 to INR 5,000||INR 35|
|Between INR 5,001 to INR 7,000||INR 75|
|Between INR 7,001 to INR 9,000||INR 110|
|Between INR 9,001 to INR 12,000||INR 180|
|Above INR 12,001||INR 208|
|Odisha||Yearly||Up to INR 1,60,000||Nil|
|Between INR 1,60,001 to INR 3,00,000||INR 1,500|
|Above INR 3,00,001||INR 2,500|
|Puducherry||Yearly||Up to INR 99,999||Nil|
|Between INR 1,00,000 to INR 2,00,000||INR 250|
|Between INR 2,00,001 to INR 3,00,000||INR 500|
|Between INR 3,00,001 to INR 4,00,000||INR 750|
|Between INR 4,00,001 to INR 5,00,000||INR 1,000|
|Above INR 5,00,001||INR 1,250|
|Punjab||Monthly||Above INR 2,50,000||INR 200|
|Sikkim||Monthly||Up to INR 20,000||Nil|
|Between INR 20,001 to INR 30,000||INR 125|
|Between INR 30,001 to INR 40,000||INR 150|
|Above INR 40,000||INR 200|
|Tamil Nadu||Monthly||Up to INR 21,000||Nil|
|Between INR 21,001 to INR 30,000||INR 135|
|Between INR 30,000 to INR 45,000||INR 315|
|Between INR 45,001 to INR 60,000||INR 690|
|Between INR 60,001 to INR 75,000||INR 1,025|
|Above INR 75,000||INR 1,250|
|Telangana||Monthly||Up to INR 15,000||Nil|
|Between INR 15,001 to INR 20,000||INR 150|
|Above INR 20,001||INR 200|
|Tripura||Yearly||Up to INR 7,500||Nil|
|Between INR 7,501 to Rs 15,000||INR 1,800|
|Above INR 15,001||INR 2,496|
|West Bengal||Monthly||Up to INR 10,000||Nil|
|Between INR 10,001 to INR 15,000||INR 110|
|Between INR 15,001 to INR 25,000||INR 130|
|Between INR 25,001 to Rs 40,000||INR 150|
|Above INR 40,000||INR 200|
With RazorpayX Payroll, professional tax payments are also taken care of along with registrations. The product uses a direct deposit model similar to any payment wallet where the user maintains a balance. The payroll expenses are automatically deducted from such balance as on the respective due dates.
It takes care of all the statutory payments such as PF, ESI, PT, and TDS automatically and also their periodical returns.
Suggested Read: Why Your Employees Need ESI
There is no need to spend time and manual efforts on maintaining employee records, their PT contribution, and payment to concerned authorities once a RazorpayX Payroll account has been set up.
Here’s the list of states where professional tax is not applicable.
|Andaman and Nicobar Islands||Himachal Pradesh|
|Arunachal Pradesh||Jammu and Kashmir|
|Dadra and Nagar Haveli||Rajasthan|
|Daman and Diu||Uttar Pradesh|
What is the procedure to pay professional tax? Is any return to be filed?
Professional tax is a state subject. There is no fixed procedure to pay professional tax. It can be paid either online or offline modes depending on the state from where the business is operating.
Also, the intervals and procedure for filing professional tax returns depend on the State.
Consequences of violation of professional tax regulation
The actual penalty depends on the respective State professional tax laws. Businesses might have to pay penalty, late fee or interest for non-registration, delay in tax payments and non-filing of returns within the specified due date.
For instance, the Karnataka state government charges an interest of 1.25% per month for any late tax payments. Whereas, West Bengal charges 12% per annum.
Exemptions in Professional Tax
The following individuals are exempt from paying professional tax:
- Parents or guardians of children with a mental disability or permanent disability
- An individual suffering from a permanent physical disability including blindness
- Any individual of above 65 years
- Members of the forces as defined in the Air Force Act, 1950, the Army Act, 1950 and the Navy Act, 1957 including members of auxiliary forces or reservists, serving in the state
- Temporary workers employed in the textile industry
- Women exclusively engaged as agents under the Mahila Pradhan Kshetriya Bachat Yojana
The bottom line
Any failure to obtain professional tax registration or depositing dues to the concerned authorities might land employers and professionals in trouble. Penalty/late fee or interest rates on late registrations or late payments are different for each state.
With RazorpayX Payroll, you, as an employer, can avoid all such consequences. The product will take care of all your professional tax dues payment and their return filing on time; leaving no scope for default with statutory compliance requirements.
Frequently Asked Questions
Is professional tax paid monthly or yearly?
Since professional tax is levied by state governments, it tends to differ for different states. Each state declares a slab and the professional tax is deducted on the basis of those slabs. However, there are few states and union territories in India that do not charge professional tax too. It is paid by dividing the annual professional tax due into 12 equal installments, which are to be paid every month. February, as a month, is an exception where the tax is higher than the other months.
Can we claim professional tax?
A person can claim the refund of the excess tax paid/deducted during a financial year by filing the income tax returns for that year. As per the Income Tax Act, an individual is required to file the return in the relevant assessment year by July 31 (unless the deadline is extended) to claim the refund from professional tax.
What is the rule for professional tax?
The state government has all authority to make laws with respect to professional tax though being a tax on income under Article 276 of the Constitution of India which deals with tax on professions, trades, callings, and employment.