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Professional Tax

Professional tax is the tax levied and collected by the state governments in India. It is an indirect tax. A person earning an income from salary or anyone practicing

a profession such as chartered accountant, company secretary, lawyer, doctor, etc. are required to pay this professional tax. Different states have different rates and methods of collection. In India, professional tax is imposed every month. However, not all states impose this tax.

The nomenclature ‘Professional tax’ could be one of those terms that do not completely convey the real meaning of the term. Unlike the name suggests, it is just not the tax levied only on professionals.

It is a tax on all kinds of professions, trades, and employment and is levied based on the income of such professions, trade, and employment. It is levied on employees, a person carrying on the business including freelancers, professionals, etc., subject to income exceeding the monetary threshold if any.

 

Article 246

As per Article 246 of the Constitution of India, only the parliament has the exclusive power to make laws concerning the union list which includes taxes on income. The state has the power to make laws only concerning the concurrent and state lists.

However, professional tax though is a kind of tax on income levied by the state government (not all states in the country choose to levy professional tax). State Government is also empowered to make laws concerning 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. It may be noted that professional tax is a deductible amount for the Income-tax Act, of 1961, and can be deducted from taxable income.

Professional tax is levied and collected by the commercial taxes department of state governments, in some states by particular municipal corporations and the majority of the Indian states are collecting this tax. It is a source of revenue for the government.

The maximum amount payable per year is INR 2,500 and in line with the payer’s salary, there are predetermined slabs. It is also payable by members of staff

employed in private companies. It is deducted by the employer from their employee every month and in some states sent to the Municipal Corporation. It is mandatory to pay professional tax. The taxpayer is eligible for an income tax deduction for this payment.

 

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