1. What professional tax is
Professional tax is a tax levied by some states on professions, trades, callings and employment. The Constitution caps it at ₹2,500 per person per year, so it is small, but missing it can lead to interest and penalties under state law.
2. Which states levy it
Professional tax is not levied everywhere. States that levy it include Maharashtra, Karnataka, West Bengal, Tamil Nadu, Gujarat, Telangana, Andhra Pradesh, Kerala, Madhya Pradesh, Odisha and Assam, among others. Several states and union territories, such as Delhi, Uttar Pradesh, Haryana and Rajasthan, do not levy it at all.
Rates, slabs, exemptions and due dates are set by each state and change from time to time, so always check your state's current rules or ask your CA.
3. Who has to pay
- Salaried employees: the employer deducts it from salary and pays it to the state. You do not need to do anything yourself.
- Self-employed professionals, freelancers and business owners: in states that levy it, you usually have to enrol yourself and pay it directly, often once a year.
- Employers: a business with employees in such a state registers as an employer, deducts it from salaries and files returns.
4. Enrolment and registration
States use different names. In Maharashtra and Karnataka, for example, self-employed people and businesses take an enrolment certificate for their own professional tax (PTEC), and employers take a registration certificate (PTRC) for the tax they deduct from employees. Most states now allow enrolment and payment online through the state tax department's portal.
5. If you work remotely
Professional tax follows where you work from, not where your client is. A freelancer in Bengaluru serving a US client is a self-employed professional in Karnataka for this purpose. If you move to another state, check its rules and update your enrolment.
6. Professional tax and income tax
How professional tax is treated in your income-tax return depends on your situation and the tax regime you choose. Keep the payment receipts so your CA can treat them correctly.
7. A quick checklist
- Check whether your state levies professional tax
- If you are self-employed there, enrol on the state portal
- Note your state's annual due date in your calendar
- If you hire staff, register as an employer and deduct it from salaries
- Keep payment receipts