Professional Tax: A State Levy Most People Never Question
Akash Kore
· Founder & Product Architect· 3 min read
Professional tax appears on payslips as a small, unexplained deduction. It is a State levy with a constitutional ceiling, and whether you pay it at all depends entirely on where you work.
- ✓Article 276 caps professional tax at ₹2,500 per person per year.
- ✓It is levied by States, and several do not levy it at all.
- ✓Employers must deduct and deposit it for employees.
- ✓Deductible from salary income under Section 16(iii), in the old regime only.
The constitutional position
Article 276 of the Constitution permits States to tax professions, trades, callings and employments, and caps the total payable by any one person at two thousand five hundred rupees a year.
That ceiling has not changed since 1988, which is why the amounts are small relative to modern salaries and why the levy is largely administrative in significance.
Where it applies
Maharashtra, Karnataka, West Bengal, Tamil Nadu, Telangana, Andhra Pradesh, Gujarat, Madhya Pradesh, Kerala, Odisha, Assam, Bihar and several others levy it. Delhi, Haryana, Uttar Pradesh, Rajasthan and the union territories generally do not.
Slabs differ: some States charge a flat monthly amount above a salary threshold, others use graduated slabs. Maharashtra's structure, for instance, charges a higher amount in February to reach the annual ceiling.
Employer obligations
Employers in a levying State must register, deduct the tax from employee salaries, deposit it by the prescribed date and file periodic returns. Self-employed professionals register and pay directly.
Penalties for non-registration and late payment are modest in absolute terms but accumulate, and the registration is a precondition for several other State approvals.
The deduction
Professional tax paid is deductible from salary income under Section 16(iii) in the old regime. The new regime does not allow it, though the tax is still deducted from pay.
It is deductible on a paid basis rather than an accrual basis, so tax deducted in March and deposited in April falls into the following year.
Frequently asked questions
### What is the maximum professional tax?
Two thousand five hundred rupees per person per year, fixed by Article 276 of the Constitution. No State can levy more than that on any individual, regardless of income.
### Which States do not levy professional tax?
Delhi, Haryana, Uttar Pradesh, Rajasthan, Punjab in most cases, and the union territories generally do not. The levy is a State choice, and the list changes occasionally.
### Is professional tax deductible from taxable income?
Yes, under Section 16(iii), but only in the old regime. Under the new regime it is deducted from your pay without any corresponding deduction from taxable income.
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Frequently Asked Questions
What is the maximum professional tax?
Two thousand five hundred rupees per person per year, fixed by Article 276 of the Constitution. No State can levy more than that on any individual, regardless of income.
Which States do not levy professional tax?
Delhi, Haryana, Uttar Pradesh, Rajasthan, Punjab in most cases, and the union territories generally do not. The levy is a State choice, and the list changes occasionally.
Is professional tax deductible from taxable income?
Yes, under Section 16(iii), but only in the old regime. Under the new regime it is deducted from your pay without any corresponding deduction from taxable income.
Akash Kore
Founder & Product ArchitectArchitecting business document operating systems and automated billing workflows for Indian SMBs, agencies, and enterprises.