What is Professional Tax? Why does an employee need to pay Professional Tax?


All you need to know about Professional Tax.

This article helps you to understand the clear concept of professional tax. What is the Procedure Involved in it? How Professional Tax is different from Income Tax?

What is Professional Tax?

Professional tax can be defined as an indirect tax that is levied by state governments in India on all persons who are earning a living through profession, trade, and employment. However, Different states have different rates and methods of collection.  But it has a maximum limit of INR 2500/- per year.

The Professional Tax Slab Rate for Tamilnadu is as under:


It is paid by dividing the annual professional tax due into 12 equal installments, which are to be paid every month. The taxpayer is eligible for an income tax deduction for this payment. Each state follows its own laws and regulations to manage the Professional tax of that particular state. But in common, all the states follow an income-based slab system.

Types of compliances covered by professional tax act and rules are

  • Registration/enrolment
  • Payment of tax
  • Filing of return
  • Displaying the certificate of registration or enrolment certificate at the place of work

Registration & Returns:

Professional Tax Registration is mandatory within 30 days of employing staff or from the start of the practice in case of Profession. Application for the Registration Certificate should be submitted to the assessee’s state tax department within 30 days.

If an employer has employed more than 20 employees, he is required to make the payment within 15 days from the end of the month. However, if an employer has less than 20 employees, he is required to pay quarterly (i.e. by the 15th of next month from the end of the quarter). The Collection of Professional Tax is a source of revenue for the state governments which facilitates in executing schemes for the wellbeing and expansion of that region.

List of documents required to register for professional tax:

  • Shop and Establishment certificate
  • Salary register and attendance register
  • Address Proof of Business
  • NOC from the owner of the Premises where the business is running
  • Bank Account details along with bank statement and Cancelled Cheque
  • Passport Size Photo, address Proof and identity proof all of the directors
  • PAN card of Company/LLP
  • Certificate of Incorporation along with MOA & AOA in case of a company
  • LLP Agreement in case of Partnership Firm

Who is responsible for the deduction?

The owner is responsible to deduct the tax from the salaries of his employees and pay the amount to the state tax department. The owner is responsible to furnish a return in the prescribed form within the specified time limit.

Penalties for Professional Tax Violation:


Income Tax vs. Professional Tax


Understanding Professional Tax Enrollment Certificate (PTEC) and Professional Tax Registration Certificate (PTRC)

An employer/professional must have dual registration. Professional Tax Registration Certificate (PTRC) is necessary for a person who is employed which provides the ability to pay the professional tax for his trade or profession Whereas Professional Tax Enrollment Certificate (PTEC) is necessary for those who own trade, business or involved in a profession which provides the ability to deduct the tax from his employees and pay it.

After reading this article has a look at your payslips, you will notice a small deduction mentioned in it along with other pay heads like HRA, Conveyance, that small portion is Professional Tax deduction. Hope, now you could have understood the concept of Professional tax & why it is deducted from your salary.

Happy Reading

Sumathy Saravanan

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