What is Professional tax?

Definition

Professional tax is a state levy on income from employment, deducted by the employer and paid to the state government. Twelve states and union territories charge nothing at all, and the Constitution caps it at Rs 2,500 per person per year.

How it works

Each state that levies it publishes its own slab table, and the two variables that decide the answer are independent: the basis, meaning the period the slab threshold is measured over, and the pay frequency, meaning how often the money is handed over. All four combinations exist in India.

What it means in India

Article 276(2) of the Constitution caps professional tax at Rs 2,500 per person per year, whatever the state. Madhya Pradesh reads an annual slab and collects monthly; Kerala reads and collects half-yearly; Bihar does both annually; Andhra Pradesh does both monthly. Karnataka adds a topped-up final instalment in February that replaces an ordinary one rather than being added on top of a full set. Getting the basis and the pay frequency the wrong way round produces an answer wrong by a factor of twelve that still looks plausible.

What people get wrong

• Reading a slab table without checking whether the salary column is monthly or annual. It is the single most common error in published professional tax tables.
• Assuming the levy is national. Delhi, Haryana, Uttar Pradesh and Rajasthan are among the twelve states and union territories that charge none.
• Registering only in the state of the head office when staff work in another state that levies it.

Work out your own number

The arithmetic on this page is easier to check against a real salary than to follow in prose, so there is a free page that does it for you. No sign-up.

Terms this one depends on

More on statutory deductions and benefits

Where this shows up in practice

Almost everything on this page ends up as a line on a payslip or a figure in a register. Shiftelio keeps attendance, leave, salary structure and the statutory deductions in one place, so the number in the letter and the number in the payslip come from the same record.