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An individual who earns their living by any means is subject to professional tax, which is levied by the state government. This is not to be confused with the definition of other professionals such as doctors or lawyers. This is a sort of tax that must be paid by every individual who earns money. This tax is calculated differently in each state, as is the amount collected. However, the annual limit has been established at Rs. 2500.
You'll see a modest deduction on your payslips, along with other components like HRA, conveyance, and basic salary breakups. This deduction, known as professional tax, is normally around Rs. 200. These taxes vary from state to state, and you may find that there is no deduction under this item in some states.
Who is responsible for collecting this tax?
Employers deduct a set amount from their employees' monthly salary as professional tax. The employer then pays the government a share of this sum. If they fail to do so, they may face fines for failing to collect or pay the professional tax. Also, if you do it for someone else, you will be responsible for paying the professional tax.
Your professional tax can be paid by registering for it through a form if you're an independent contractor who doesn't have an employer. The individual will be given a registration number once you receive the form. Professional tax payments can be paid at banks using these registration numbers. It's worth noting that in some places, the government will give you a tax break if you pay your taxes all at once for a couple of years. As a result, it is worthwhile to inquire about the professional tax rules in your state.
Why do different people's professional taxes differ?
State governments are responsible for collecting professional taxes, therefore they tend to be different in each one. Each state establishes a slab, based on which the professional tax is deducted. However, in India, only a few states and union territories do not levy a professional tax. It is paid by splitting the annual professional tax due into 12 equal monthly instalments. February is an exception, as it has a higher tax rate than the other months.
There may be instances where sources of revenue from distinct industries are subject to a separate tax. For example, in some jurisdictions, a person operating a transportation service may be required to pay a professional tax of around Rs. 50 per year for each car he owns. This could be limited to a maximum of Rs. 1,000 every year.
Tax slabs for professionals in various states
For professional taxes, each state has its own slab. The slabs for various Indian states and union territories are listed below :