What Is Professional Tax?

If you are a paid professional, you have probably seen the phrase “professional tax” on your paycheck or Form 16. So, what exactly is a professional tax, and why should you care?

In this article, we’ll try to break down what professional tax is, why it’s taken out, and other often asked questions.

Professional tax: what is it and why do we pay it?

One of those terms that doesn’t quite say what it means, “professional tax” is a bit of a mouthful. Despite what the name would imply, this is not an occupation-specific tax. This is the tax levied on every industry, business, and occupation. It relies on a person’s regular earnings from an occupation or business. It applies to all individuals who earn in this way, whether they have a regular job, a side hustle, or are self-employed, after their yearly earnings surpass the threshold amount.

According to the Indian Constitution’s article 246, only the Parliament has the authority to enact legislation governing the Union List, which includes the taxes levied on different types of income. Laws affecting just the state or the concurrent list can be made or changed by the state. The state government collects professional tax, which is a form of tax on an individual’s income.

Professional Tax Rates

State governments control and impose professional taxes, therefore tax rates vary from one state to the next. The professional income tax regulations in effect in any given state vary from jurisdiction to jurisdiction. One thing that all states have in common is that they all use a professional income tax slab structure.

In addition to granting the state government the authority to levy the professional tax, article 267 of the constitution puts some constraints on the process. The state government is limited to collecting a maximum of Rs 2,500 in professional tax from each citizen.

The levying of the expert tax is the responsibility of the Commercial Tax Division. Funds for municipal corporations are accumulated at the state level.

Professional Taxpayer – Individual or Organization Liable for Making Tax Payments

Who must pay a specialized tax? This tax must be paid by everyone receiving a wage as their primary source of income. Professionals in other fields, such as law, medicine, and medicine, are also included. Merchants, company owners, and those in a variety of other professions are all subject to this tax. Employees working for private businesses must additionally contribute to the professional tax.

It is the employer’s duty to withhold and remit employees’ professional taxes to the appropriate authorities. The legislation of the relevant state specifies the slabs that must be used for this purpose. Employers, whether they be corporations, partnerships, or single proprietors, are all considered “professionals” who must pay professional tax. The same laws that apply to everyone else in the state also apply to them.

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