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Profession Tax: Meaning, Rates, and Applicability

by | May 5, 2024 | Notifications, 2017 Notifications, Income Tax, Integrated Tax (Rate) 2017 Notifications | 0 comments

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Profession Tax: Meaning, Rates, and Applicability

If you’re employed, you’ve probably noticed a line item for profession tax deduction on your monthly salary slips or Form 16. Despite its name, professional tax isn’t exclusive to certain professions; it applies to all occupations, including freelancers, professionals, and business owners. This tax is imposed by state governments on individuals engaged in various professions, trades, or employments, provided their income surpasses a specified threshold. Understanding why it’s imposed and how it differs from income tax is crucial.

Professional tax serves as a source of revenue for state governments, contributing to various public welfare initiatives and infrastructure development projects. Unlike income tax, which is levied by the central government, professional tax falls under the purview of state governments. It’s designed to ensure that individuals benefiting from state-provided services and infrastructure contribute their fair share towards their maintenance and improvement.

One key distinction between professional tax and income tax lies in their jurisdiction and allocation of funds. While income tax revenue is primarily allocated to the central government, professional tax revenue is retained by the respective state governments. Additionally, professional tax rates and thresholds may vary across different states, reflecting the varying fiscal priorities and economic conditions.

What is Profession Tax?

Professional tax, administered by state governments, stands as a vital revenue stream, although some states opt not to impose it. This tax serves as a means for enhancing services and amenities for professionals within the state. Empowered by lawmaking capabilities, state governments regulate professional tax, which your employer remits to the state treasury on your behalf. The deducted amount typically hovers around INR 200, but this figure varies among states.

Who is Responsible for deducting Profession Tax?

For salaried individuals and wage earners, it’s the employer’s responsibility to deduct professional tax monthly. To do so, the employer must secure both the Professional Tax Registration Certificate, enabling tax payment on their trade or profession, and the Professional Tax Enrollment Certificate, facilitating tax deduction from employees’ salaries. Self-employed individuals conducting their trade or profession independently are obligated to remit the tax directly to the state government if they fall within the professional tax purview.

Profession Tax Slab

In Maharashtra, the professional tax slabs are as follows:

Monthly Salary / Wages Professional Tax Per Month Up to INR 7,500 Nil INR 7,501 to INR 10,000 INR 175 INR 10,001 and above INR 200

Income per month (INR)Tax per month in (INR)
Up to 7500 for MenNil
Up to 10000 for WomenNil
7501 to 10000 for Men175
More than 10000200 ( And 300 for February)
Gujarat (Effective from 01/04/2022)
Income per month (INR)Tax per month (INR)
Up to 12000Nil
More than 12000200
Karnataka
Income per month (INR)Tax per month (INR)
Up to 15000Nil
More than 15000200
Tamil Nadu (Effective from 01/04/2022)
Income per month (INR)Tax per month (INR)
Upto 21000Nil
21,001 to 30,000135
30,001 to 45,000315
45,001 to 60,000690
60,001 to 75,0001025
More than 75,0001250

Consequences of not getting registered for Professional Tax

Failure to register for professional tax can lead to penalties, and the severity of these penalties varies depending on the regulations of the respective state. Penalties may include fines or interest charges for the duration of non-registration. Additionally, failure to pay the tax on time or delayed payments can incur an additional 10% tax.

Procedure to Pay Professional Tax

Professional tax can be paid through both online and offline modes. The frequency of return filing, whether monthly, annually, or semi-annually, is determined by the laws of the state in which the individual or entity is liable to pay the tax.

Read More: Income Tax on Pensions

Web Stories: Income Tax on Pensions

Official Income Tax Return filing website: https://incometaxindia.gov.in/

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