It is a tax on all kinds of professions, trades, and employment and levied based on the income of such profession, trade and employment. It may be noted that professional tax is a deductible amount for the purpose of Income-tax Act, 1961 and can be deducted from taxable income.
What is professional tax deduction?
Professional tax or tax on employment is a tax levied by a state, just like income tax which is levied by the central government. It is usually deducted by the employer and deposited with the state government. In your income tax return, professional tax is allowed as a deduction from your salary income.
Is professional tax necessary?
Drawing a regular income in the form of a salary or as professional fees for your services requires you to pay a professional tax. Every professional has to pay this tax to their respective state governments based on their earnings.
What is the use of professional tax?
Professional Tax is a state tax, imposed by a state government on account of the infrastructure it provides to you so that you can carry out your profession in that state. In a way, it is much like a toll bridge; if you use the facility, you must pay a token amount.
How is professional tax deducted from our salary?
However, no state can levy professional tax beyond ₹ 2,500 on any taxpayer in a year. Professional tax payment is allowed as a deduction from taxable income as per the Income-tax Act, 1961.
Is there a tax deduction for professional tax in India?
According to Section 16 (iii) of the Income Tax Act 1961, the profession tax paid by an employee is allowed as a deduction from his/her gross salary income. Following are some of the Indian states and union territories where professional tax is applicable:
Is the professional tax the same as income tax?
Professional tax is not the same as income tax, but it an important component of your tax obligation. So, understanding it will help you file your taxes more easily and understand the deductions too. What is professional tax? Professional tax is a tax that is levied by the state government and applies to income you earn through employment.
How is professional tax calculated in an organisation?
Similarly, like other taxes, it too has slabs, and all paid employees of an organisation and independent professionals fall under its various categories. Professional Tax calculation is based on predetermined slabs and on the basis of the salary or monthly income levels.
