Constitutional Basis and Maximum Limit
Professional tax is a state subject under Entry 60 of the State List (Schedule VII of the Constitution). Article 276 of the Constitution caps the maximum professional tax at ₹2,500 per person per year. States cannot levy more than this. The tax applies to persons engaged in any profession, trade, calling, or employment — including salaried employees, doctors, lawyers, engineers, architects, and self-employed professionals. Not all states exercise this power — states like Delhi, Haryana, Rajasthan, and Uttar Pradesh do not levy professional tax.
State-Wise Rates (Key States)
- Karnataka: ₹200/month for gross salary above ₹15,000, levied for all 12 months, making the annual total ₹2,400 for most employees. Employees earning ₹10,001–₹15,000 pay ₹150/month.
- Maharashtra: Salary up to ₹7,500 — nil. ₹7,501–₹10,000 — ₹175/month. Above ₹10,000 — ₹200/month (₹300 in February). Annual total up to ₹2,500.
- Tamil Nadu: ₹2,400/year for salary above ₹21,000. Paid half-yearly.
- Telangana: ₹200/month for salary above ₹20,000. Annual total ₹2,400.
- West Bengal: Slab-based, up to ₹2,500/year for salary above ₹40,000/month.
- Gujarat: ₹200/month for salary above ₹12,000. Annual total ₹2,400.
Employer Obligations: PTRC and PTEC
Employers in states that levy professional tax must obtain two registrations: a Professional Tax Registration Certificate (PTRC) — for deducting PT from employees' salaries and depositing it with the state government; and a Professional Tax Enrollment Certificate (PTEC) — for the employer's own professional tax liability as a business entity. PTRC holders must file monthly or annual PT returns depending on the state. In Karnataka, employers with more than 20 employees file monthly; others file annually. Failure to deduct or deposit PT attracts penalties and interest under the respective state PT Act.
Income Tax Deduction Under Section 16(iii)
The professional tax deducted from salary is allowed as a deduction from gross salary under Section 16(iii) of the Income Tax Act. This deduction is available under both the old and new tax regimes — unlike most other deductions which are only available under the old regime. The deduction equals the actual professional tax paid during the financial year. If professional tax for two years is paid in one year (arrears), only the amount relating to the current year is deductible — arrears are deductible in the year they are paid, subject to the ₹2,500 annual cap per year.