Professional tax is a state-level tax levied on individuals earning income through employment, trade, profession, or calling. Unlike income tax, which is collected by the Central Government, professional tax is imposed by the respective state or union territory. For salaried individuals, the employer deducts professional tax from their salary and deposits it with the state government. In other cases, individuals must directly pay the tax. The amount and calculation of professional tax vary across states, but it is capped at a maximum of Rs. 2,500 per year.
Professional tax applies to:
Employers must deduct the professional tax from employees' salaries and submit the payment to the state government within the prescribed time. Failure to provide proof of payment with the tax return can invalidate the submission.
Exemptions apply to certain individuals, including:
Professionals must register for professional tax within 30 days of employing staff or starting their business. If a business operates in multiple locations, separate applications are required for each jurisdiction.
All individuals liable for professional tax must file a return as per the state's due dates, which vary by location.