Professional Tax- Understanding Tax Slab Rates, Its Application and Exemption Process

Have you paid close attention to your salary statement? If yes, you would have come across a component which is termed as “Professional Tax”. This component does not get missed, especially if you are working in the private sector. Over the years, the professional tax deduction has become an integral part of all payslips. Regardless of your pay or the role you engage in – the tax component will be deducted. 

So, what is professional tax? How does it make a difference in your take-home? Also, why is it deducted from everybody’s paycheck? If these questions are in your mind, the next few lines will make sense to you. 

What Is Professional Tax?

First things first, this tax component is introduced by the state government. This means the amount goes towards the government of the state you are currently working in. 

• The tax is imposed on any individual who makes an income. It does not depend on the source or medium of the income. 
• This means engineers, lawyers, and anyone with a source of income will be asked to pay the professional tax. 
• Of course, you must not mistake the term professionals with vocations like Doctors. People often believe that professional taxes are only meant for doctors and other professionals. 
• Well, in reality, it applies to “everyone”. The method used to calculate a person’s professional tax deduction depends on the state. 

For example, the method used by Karnataka will be completely different from the strategy followed by Maharashtra. Nevertheless, the tax figure cannot exceed 2500. This is the upper limit of tax anyone would be asked to pay in this category. 

Why does Professional Tax Deduction Differ?

Now, you might ask why the professional tax amount differs from one individual to another. Interestingly, multiple factors are taken into consideration before the final amount is decided. 

1. One of the most common reasons why the tax amount differs would be the state. As mentioned previously, the amount depends on the state. Hence, the method used to compute the amount varies. As a result, the amount paid by each individual differs.
2. There are slabs to estimate the amount a person needs to pay. Once again, the professional tax slab is defined by the state. 
3. The mode of payment is common across states and individuals. The total value is divided neatly by 12. This means an individual will pay twelve equal instalments. However, the amount you pay in February will be slightly higher than the other months. A reason behind this would be the number of days in February (it is always a day or two less). 
4. In some cases, people may have a different source of income. This means the money made would fall under a different category. Within the other category, a different type of tax could be levied. Let’s understand this with an example. You could be someone owning a transportation business. In this sector, you may be asked to pay Rs 50 for every vehicle you own and operate. The tax cap for vehicles is as high as Rs 1000.

When Is The Professional Tax Collected?

Unlike many other tax returns or payments – professional tax is collected every month. This means you will see this tax component every month. It would be impossible to see a paycheck without the tax. For instance, if an organisation does not pay professional tax, the government will impose a fine on them. 

If you are not an employee of a “company” but are self-employed, the tax still needs to be paid. In these situations, you need to take the burden of paying tax yourself. Once again, those who fail to pay professional tax will receive penalties. Unlike the other category, you can choose to pay in a lump sum or monthly. 

How Do Self-employed Professionals Pay Professional Tax?

Self-employed professionals need to pay the p tax. Nearly all state government authorities neatly document the steps for paying professional tax. 

However, here is a simple guide to help you:

1. First, the individual has to apply for the application form and register. 
2. When the application form is issued, the applicant will receive a registration number. The registration number will be unique to the applicant.
3. With this registration number, one can pay professional tax at any bank. 
4. If you choose to pay the amount in a lump sum, you may receive rebates. This depends on the state and its regulations. Hence, you should try to understand the terms and conditions in your state. 

Also Read: Advance Tax in India

How To Fill The Professional Tax Application Form

Now you can secure the application form for paying professional tax online. This makes the entire process much simpler. Here is a guide on how to fill this application:

1. Navigate to the official site of Professional Taxes (https://pt.kar.nic.in) for the state of Karnataka.
2. Navigate to the sidebar (left), and click on “Enrollment Application”. This will guide you to a new page.
3. Click on “New” if you are paying the tax for the very first time. If you have paid the tax using this method before, click on “Enrolled”. 
4. Enter the class of person, the professional tax office, business status, financial year and the type of return.
5. Click on Next.
6. You will be asked for a few more details. 
7. The last step is to make payment. Often, the site supports credit cards, debit cards and net banking. 
8. Upon completion of payment, you will receive a receipt. This receipt can be downloaded and saved.

Who Needs To Pay Professional Tax?

Another common question raised around professional tax would be: who needs to pay? The following list speaks about professional tax applicability. Everyone in this list would see the calculation of professional tax in their monthly take home.

1. Clubs
2. Companies
3. Firms
4. Societies
5. Corporations
6. Engineers
7. Architects
8. Contractors 
9. HUF
10. Associations
11. Surveyors
12. Chartered accountants
13. Tax consultants 
14. Management consultants 
15. Solicitors (legal practitioners)
16. Insurance agents
17. Medical professionals like doctors, dentists and nurses

The p tax slab for each of these professionals differs. As mentioned above, you need to bear in mind that the state government imposes the rules. Hence, it would help if you read about your state’s regulations to determine the p.tax slab you would fall in. 

Professional Tax Across States

Now, let’s try to understand the tax levied across states. In this post, we have chosen eight different states to describe how to calculate professional tax on salary: 

Few Exemptions to Professional Tax

Now, it is important to understand that some people are not expected to pay professional tax. Here is a quick guide for such individuals:

1. If a person is running an educational institution that teaches students upto the 12th grade, they are not expected to pay any professional tax. 
2. Anyone who works for the Central Para Military Force (i.e. CPMF) does not pay this tax.
3. Individuals who have children, and if one has undergone the sterilization operation. Nevertheless, these parents need to prove all the proofs of the document. The state body has a list of documents that need to be submitted by the parents. 
4. If the individual were an ex-serviceman, they would not need to pay either.
5. If the individual is disabled, they can refrain from paying the professional tax. To be more precise, any individual with at least 40-percent disability can choose not to pay the tax. Once again, they need to provide all relevant certificates. 
6. If a person has received a three-wheeler permit, carrying goods or a taxi, they don’t have to worry about professional tax slab rates. 
7. Individuals who are deaf, dumb or blind, but with a working income don’t fall within any professional tax payment slab.
8. Combatant members and civilian non-combatants who were once an integral part of the Army Force don’t need to pay professional tax. However, you must bear in mind that these individuals need to abide by the Army Act. The Army Act controls the policies the Armed Forces need to follow.
9. When the state employs technicians from another country, they don’t have to pay the regional professional tax.
10. Charitable hospitals and philanthropic missions that are located at the taluk level can refrain from paying professional tax. 

Also Read: Income Tax in India: Basics, Slabs and E-filing Process 2021

Conclusion

We hope this article has helped you in understanding all about professional tax and professional tax calculation. However, as professional tax is a state-level tax, it varies from state to state. Therefore, check the professional tax charged by your state for clarity on the specifics of the tax.