DOES THE AMOUNT OF PROFESSIONAL TAX TO BE IMPOSED VARY FROM ONE STATE TO ANOTHER?

Professional Tax is deducted under Section 16(iii) of the Income Tax Act. Since Professional Tax is an indirect state tax, the amount of Professional Tax to be deducted varies from one state to another based on certain rules and regulations decided by the concerned state government. That is, the states are free to impose a rate that they think is fit for the citizens in their jurisdiction. As we have already discussed, the majority of the Indian states and union territories, but not all, charge Professional Tax. For example, states like West Bengal, Maharashtra, etc. do impose Professional Tax, while states like New Delhi and Haryana have not yet introduced Professional Tax. Now, let us have a brief look at the subject that how Professional Tax is imposed and how does that vary from one state to another.

Amongst the states that charge Professional Tax, some charge it as a percentage while others charge it as a fixed amount to be deducted based on certain predetermined income slabs. That is, the amount of Professional Tax that is to be imposed on an individual annually is based on his/her salary or income and also on some predetermined tax slabs as decided by the respective state government. These tax slabs may also vary from time to time, as decided by the state government. However, in any state, the maximum amount of Professional Tax that can be imposed on a person on an annual basis is Rs. 2500. Hence, the amount of Professional tax to be paid varies from one state to another.

The rate of Professional Tax differs from state to state in India. So, one must be aware of the prevailing rates and rules regarding Professional Tax in his / her particular state, especially if the person is an independent professional. Some states also happen to provide special tax rebates on Professional Tax if the tax is paid in a lump sum for a few years together.

If one fails to pay Professional Tax, then the matter is subject to penalty. The penalty also is imposed by the respective state and hence, varies from one state to another. Some states straightaway slap a penalty of Rs. 300 for every late filing of returns. Hence, one must also be aware of the penalties that can be imposed on an individual for non-compliance on the payment of Professional Tax.

Another important fact about Professional Tax is that it was introduced in India in the year 1949 and since then only, the state governments were authorized to collect it and hence, recognized as a state tax. At the time of introduction, the maximum amount of Professional Tax levied on an annual basis on any individual was Rs. 250. However, by the year 1988, this maximum limit increased to Rs. 2500 per individual, annually. Since then, it has been capped at Rs. 2500 and has not been increased further by any of the states or union territories.