What is Professional Tax? | Meaning & Definition | Akrivia HCM

The state government levied a professional tax on salaried individuals, entrepreneurs, and professionals engaged in any trade, profession, or employment. Income tax is calculated as a percentage of an individual’s income, which varies from state to state. The Professional Tax is considered a direct tax and is deductible from the taxable income of the individual or entity. The employer collected the tax from the employee’s salary and paid it to the state government. The tax is paid directly to the state government for self-employed individuals and businesses.

Professional tax varies from state to state. Each state has the authority to determine the rate and structure of professional tax based on its own economic and social conditions. As such, professional tax rates may differ depending on the state’s revenue needs, demographics, and the number of people who earn taxable income from various professions. The maximum limit of PT is RS 2500 per year.

Who collects Professional Tax? 

The respective State Governments collect the professional tax, and the rates and rules governing the tax may vary from state to state. The tax is levied quarterly or yearly based on the income earned during that period.

Where is Professional Tax Applicable

It is applicable in India and managed by the respective state governments. Each state has its own set of professional tax rules and regulations.

In India, professional tax is applicable in the following states:

  1. Andhra Pradesh
  2. Assam
  3. Bihar
  4. Chhattisgarh
  5. Gujarat
  6. Karnataka
  7. Kerala
  8. Madhya Pradesh
  9. Maharashtra
  10. Meghalaya
  11. Mizoram
  12. Nagaland
  13. Odisha
  14. Punjab
  15. Sikkim
  16. Tamil Nadu
  17. Telangana
  18. Tripura
  19. West Bengal

Exemptions in Professional Tax

There are certain exemptions and deductions available under the professional tax, which are as follows:

  1.  Some states provide an exemption for senior citizens who have crossed a certain age limit, such as 65 years.
  2. Some states exempt persons with disabilities from professional tax
  3.  Some states exempt individuals who have not been employed or unemployed for a certain period.
  4.  Some states offer an exemption for individuals whose income falls below a certain threshold.
  5. Individuals earning income from agriculture are exempt from professional tax.

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