Professional Tax is a direct tax levied by State Governments on income earned by way of profession, trade or employment. The Professional Tax is not being levied in all States. While some States levy this tax some States do not levy this tax. The States who have levied this tax have different slabs / rates. Thus, the liability for payment of this tax is not uniform in all States. This tax (like income tax) is levied based on slab basis on the Income earned by an Individual from his profession.
When this tax was first introduced, the maximum limit of the tax to be collected was Rs. 250. This limit was raised from Rs. 250 to Rs. 2500 in the year 1988. For the past few years, State Governments have been requesting for raising the ceiling from Rs. 2500 to Rs. 7500. However, their request has not been accepted and the Maximum Amount of Professional Tax that can be levied by any State Government is Rs. 2,500 only.
Liability to Pay
In case of Salaried and Wage earners, the Professional Tax is liable to be deducted by the Employer from the Salary / Wages of the employee and the Employer is liable to deposit the same with the state government. In case of other Individuals, this tax is liable to be paid by the person himself to the State Government.
Deductible for the purpose of Income Tax
The Professional Tax paid to the State Government is allowed as a deduction under Section 16 of the Income Tax Act and Income Tax on the Balance Amount is levied as per the Income Tax Slab Rates in force.
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