Professional Tax which every employee should know

Professional Tax is a state-level tax imposed on individuals earning an income through employment, business, or profession. It is governed by Article 276 of the Indian Constitution, which empowers state governments to levy this tax. Here’s an overview of what it is and why it exists:

Purpose of Professional Tax

1. Revenue Generation:
   • Professional tax is a source of revenue for state governments, helping fund welfare programs such as education, healthcare, and infrastructure development.
2. Regulation of Professions:
   • It acts as a tool to formalize and regulate professions, trades, and businesses, ensuring individuals and businesses comply with tax laws.

Who Pays Professional Tax?

• Salaried employees (deducted by the employer from salaries).
• Professionals like doctors, lawyers, chartered accountants, etc.
• Business owners or self-employed individuals.

How It Works

• Employers deduct professional tax from employees’ salaries and remit it to the state government.
• Self-employed individuals register themselves and pay the tax directly.

Tax Rates and Applicability

• Rates vary across states, with a maximum cap of ₹2,500 per year as per the Constitution.
• Only states that have enacted a professional tax law can impose it. Examples include Maharashtra, Karnataka, West Bengal, and Tamil Nadu.
• States like Haryana, Uttar Pradesh, and Delhi do not levy this tax.

Professional tax is a state-imposed tax levied on individuals earning income through employment, trade, or profession in India. It is applicable in certain states, with different rates and thresholds based on income levels. Here’s a summarized table of professional tax rates across India for December 2024:Professional tax is typically deducted by employers and remitted to the state government. For self-employed professionals, registration and direct payment are required. Non-compliance can result in penalties or legal actions​.

India has 28 states and 8 Union Territories, making a total of 36 administrative divisions. Below is a comprehensive table that includes all 28 states and the applicable professional tax situation for each as of December 2024:

State/Union Territory	Professional Tax Status	Annual Taxable Amount	Notes
Andhra Pradesh	Applicable	₹2,500	Salaried individuals earning above ₹15,000 monthly.
Arunachal Pradesh	Not Applicable	₹0	No professional tax levied in the state.
Assam	Applicable	₹2,500	Based on income slabs.
Bihar	Applicable	₹2,500	Levied on income above ₹10,000 per month.
Chhattisgarh	Applicable	₹2,500	Tax for income above ₹10,000 monthly.
Goa	Not Applicable	₹0	Professional tax is not levied.
Gujarat	Applicable	₹2,400	Progressive rates based on monthly income slabs.
Haryana	Not Applicable	₹0	No professional tax levied in Haryana.
Himachal Pradesh	Not Applicable	₹0	No professional tax is imposed.
Jammu & Kashmir	Applicable	₹2,500	Tax applies to salaried employees and professionals.
Jharkhand	Applicable	₹2,500	Levied on income levels as per applicable tax slabs.
Karnataka	Applicable	₹2,400	Income above ₹12,000 monthly incurs tax.
Kerala	Applicable	₹2,500	Tax for individuals earning more than ₹12,000 per month.
Ladakh	Not Applicable	₹0	No professional tax levied in Ladakh.
Lakshadweep	Not Applicable	₹0	No professional tax levied.
Madhya Pradesh	Applicable	₹2,500	Tax is progressive based on income levels.
Maharashtra	Applicable	₹2,500	Highest rates for income above ₹10,000 monthly.
Manipur	Applicable	₹2,500	Tax levied on salaried individuals.
Meghalaya	Applicable	₹2,400	Tax applies depending on monthly income brackets.
Mizoram	Applicable	₹2,400	Income levels determine professional tax rates.
Nagaland	Applicable	₹2,500	Tax applies to all salaried employees above ₹15,000 per month.
Odisha	Applicable	₹2,500	Monthly income levels decide taxable amounts.
Puducherry	Applicable	₹2,500	Applicable to salaried professionals and employees.
Punjab	Applicable	₹2,500	Based on monthly income of ₹10,000 or more.
Rajasthan	Not Applicable	₹0	No professional tax imposed.
Sikkim	Applicable	₹2,400	Progressive income tax is applied.
Tamil Nadu	Applicable	₹2,500	Professional tax is deducted for income earning professionals.
Telangana	Applicable	₹2,500	Salaried professionals earning ₹15,000 monthly are subject to tax.
Tripura	Applicable	₹2,400	Monthly income tax levels determine the taxable rate.
Uttar Pradesh	Not Applicable	₹0	No professional tax levied in Uttar Pradesh.
Uttarakhand	Not Applicable	₹0	No professional tax in this state.
West Bengal	Applicable	₹2,400	Tax rates apply for income slabs above ₹8,500 monthly.
Andaman & Nicobar Islands	Not Applicable	₹0	No professional tax is levied here.
Chandigarh	Not Applicable	₹0	No professional tax levied.
Daman & Diu	Not Applicable	₹0	No professional tax levied.
Lakshadweep	Not Applicable	₹0	No professional tax levied here.

Summary

• Total States Covered: 28 states + Union Territories = 36 regions considered.
• States/Union Territories with Professional Tax: 21
• States/Union Territories without Professional Tax: 15

Key Observations

1. States like Maharashtra, Tamil Nadu, Karnataka, and West Bengal actively levy professional tax at variable levels depending on income.
2. Several states like Haryana, Uttar Pradesh, Himachal Pradesh, and Rajasthan have no professional tax.
3. Union Territories like Ladakh, Lakshadweep, Andaman & Nicobar, Daman & Diu, Chandigarh, and others are exempt or have no professional tax mechanisms.

Why It Exists

Professional tax has a historical context, originating during colonial times in India. Its modern form is adapted to align with state-specific needs and is considered a straightforward way for states to augment their revenues while ensuring minimal compliance burdens.

If you need further clarification or examples of how it applies in different states, feel free to ask! 😊