Professional Tax

What it means

Professional tax is a tax charged by state governments on people earning a living through salary, profession, trade or employment. The Constitution caps it at ₹2,500 per person per year. Each state has its own law and slab rates, and some states such as Delhi do not levy it at all.

How it works

• Employers deduct it from employees’ monthly salary and pay it to the state, filing periodic returns. In Maharashtra, the employer’s registration is called PTRC.

• Self-employed people, professionals, firms and companies pay it for themselves. In Maharashtra, this enrolment is called PTEC, with ₹2,500 a year payable by 30 June.

• Rates depend on monthly salary. In Maharashtra, salary above ₹10,000 a month attracts ₹200 a month and ₹300 in February, totalling ₹2,500 a year; women earning up to ₹25,000 a month are exempt.

• Gujarat charges ₹200 a month on salary of ₹12,000 and above. Karnataka, West Bengal, Tamil Nadu, Telangana and others have their own slabs.

• Income tax: professional tax paid is deductible from salary under the old regime. It is not deductible under the new regime.

Example

Ramesh works in Mumbai with a monthly salary of ₹40,000.

1. April to January (10 months) and March (1 month): 11 months x ₹200 = ₹2,200.

2. February: ₹300.

3. Total professional tax for the year: ₹2,200 + ₹300 = ₹2,500.

4. Under the old regime, Ramesh deducts ₹2,500 from his salary income. Under the new regime, no deduction is allowed, though the ₹2,500 is still payable to the state.

If his employer has 20 such employees, it deposits ₹4,000 a month (₹6,000 in February) and files returns with the state.

Key points to remember

• Employers must register within the time set by the state law once they have employees; delay attracts interest and penalty.

• Directors of companies and partners of firms in Maharashtra generally need their own enrolment.

• If you change jobs mid-year, make sure the total deducted by both employers does not exceed ₹2,500.

• Rates and due dates differ by state, so check the rule of the state where the office or employee is based.