About Professional Tax
Professional Tax (also referred to as Profession Tax) is a tax on income levied by state government authorities in India. If an organization operates in a state which has legislated levy of Profession Tax, it is bound to deduct Professional Tax from its employees’ salary and remit the same to the relevant state government authority within the specified statutory deadline. Currently, Professional Tax is levied in only some states and union territories in India.
Article 276 in the Constitution of India empowers states to levy taxes on professions, trades, callings and employments. According to Article 276:
“Notwithstanding anything in article 246, no law of the Legislature of a State relating to taxes for the benefit of the State or of a municipality, district board, local board or other local authority therein in respect of professions, trades, callings or employments shall be invalid on the ground that it relates to a tax on income.”
Professional Tax or Profession Tax is more formally referred to as “tax on professions, trades, callings and employments” by state governments. The Income Tax authorities (Section 16 (iii) of the Income Tax Act, 1961) refer to Professional Tax as “tax on employment.” Professional Tax features as item no. 60 in the State List under the Seventh Schedule of the Constitution of India.
Article 276(2) mandates the maximum amount of Profession Tax which can be levied by state governments in a year. Currently, the Professional Tax levied cannot exceed Rs. 2,500 per person per annum.
Article 276(2) –
The total amount payable in respect of any one person to the State or to any one municipality, district board, local board or other local authority in the State by way of taxes on professions, trades, callings and employments shall not exceed two thousand and five hundred rupees per annum.
Article 276(2) states that the maximum Professional Tax payable to the “state or to any one municipality…” shall not exceed Rs. 2,500 per year. Surely, the term “state” is overarching and includes municipalities and other state authorities. We wonder what was the need to refer to “municipality, district board..” in the text of article 276(2). Given that each state levies Professional Tax through a designated body, it can be assumed that an individual is not liable to pay more than Rs. 2,500 per annum as Professional Tax to a state.
Can the employee, on the basis of article 276(2), make a case to Company B that they should not be deducting Professional Tax of Rs. 1095 for the salary he receives for Jul 14 to Sep 14?
While the employee has a case, employers typically do not consider the Professional Tax deducted by other employers within the same Professional Tax deduction period while calculating Professional Tax on an employee’s salary. Employers argue that there is no official mechanism to validate information on Professional Tax deducted by an employee’s previous employer(s).
Authorities such as the Corporation of Chennai do not track individual employees with a unique identifier (such as PAN or Aadhaar number). Consequently, such authorities receive more than Rs. 2,500 per annum as Professional Tax from a single employee in some instances, particularly when employees move from one employer to another within the same Professional Tax period.
The Impact of Professional Tax on Income Tax Calculation
Section 16(iii) of the Income Tax Act, 1961, states that “the tax on employment (Professional Tax) within the meaning of article 276(2) of the Constitution of India, leviable by or under any law, shall also be allowed as a deduction in computing the income under the head “Salaries.”
To the extent of Professional Tax, the salary of an employee may be reduced while arriving at the taxable salary of the employee.
Attention: Payroll Manager
- Check if work locations of the offices in your organization are liable to pay Professional Tax to the state authorities and if applicable, register your organization with the state authorities responsible for levying Professional Tax.
- Apply the correct Professional Tax slab rates as mandated by local authorities.
- Deduct Professional Tax periodically from employees’ salary as a deduction in payroll and display the amount on employees’ payslip.
- Calculate the income tax of your employees after considering the Professional Tax amount as a deduction.
- Calculate Professional Tax correctly whenever your employees are transferred from one location of your organization to another within the same Professional Tax deduction period and when a resignee rejoins your organization within the same Professional Tax deduction period.
Posted in: BlogLeave a Comment (18) ↓
Is the Professional tax calcuated on gross salary or earned salary?
Yeah that is ok Sir… Overtime and monthly allowances is not included in professional tax calculation. Please explain.
OT and other allowances are included for the purpose of PT calculation.
My salary is more than 25000 from first of july 2016 how much proffessional tax may be deduct on 30 september 2016 in bihar sir
For a monthly salary of more than Rs 25,000 (but less than Rs 41,667), the monthly PT shall be Rs 83.
is there any PT calendar from where we can get the PT slab & Date of Deposit for each applicable state?
Not sure if there is one.
My doubt is regarding Tax on employment. I have salary income from two companies where both the companies deducted tax on employment which works out to Rs.4200. While filing my return am I eligible to claim Rs.4200 deduction from salary or Rs.2400 only. Kindly do the needfull.
You can use Rs 4,200 for tax calculation.
I was working in Karnataka, where Professional Tax is deducted every month for Rs. 200. After 4 such deductions from April 2017 to July 2017 i.e. Rs. 800, I got transferred to Bihar within the sane Organisation. Now in Bihar the Professional Tax system is Annual and they deduct in the month of September Rs. 2000 as per the Slab prevailing in Bihar. There was no deduction in the month of August.
Now if I see my complete year Professional Tax, it is Rs. 2800.
No my Queries are:
1. As per the Professional Tax Slab in Karnataka, My deduction was Rs 800 till July and for the remaining Income from August 2017 to March 2018 in Bihar, My income slab suggests Professional Tax to be Rs. 1000 (3 Lakhs to 5 Lakhs)
It means total Tax I need to pay is Rs 1800/- only for the complete year. and I should get back Rs. 1000/- back to my Account.
2. They should consider only Professional TAx of Bihar i.e. Rs. 2000/- and should refund Rs. 800/- back to my account.
3. As per your blog above, Maximum Professional Tax that can be deducted is Rs. 2500/- so I should get back Rs. 300/- back to my Account.
4. OR there is some different way to look into this case.
Unfortunately, I do not think there is any process available to receive the refund of the excess PT deducted across states. You can check with the PT authorities in this regard.
I am a Govt . Employee of Assam.
Rs. 208/-P.M is being deducted as P.Tax against my Gross monthly income.
In the current FY(2017-18) I got some arrear salary of previous year(2016-17) and Rs. 224/- has been deducted as P.Tax against the arrear salary. So, overall my total P.Tax for the year= 2720/- (208×12=2496 + 224= 2720/-) which exceed the limit. Can I put 2720/- as P.Tax on Income Tax Form-16 for the 2017-18 FY.
Waiting for your reply.
You can state the total amount of PT deducted.
I have received salary from two employers and both of them deducted 2400 p.a. as professional tax. Total amount deducted is 4800. So what amount can be allowed in Income Tax U/s 16(iii)?
You can enter Rs 4,800 as the Profession Tax amount.
I want to know that the professional tax should be deduct by gross sallery or net sallery.