Professional Tax

Professional tax is a state-level tax imposed by certain state governments in India on individuals engaged in professions, trades, employment, or vocations. It applies to salaried employees, self-employed persons, and professionals such as doctors, lawyers, and chartered accountants. The employer is responsible for deducting professional tax from the employee’s salary and depositing it with the respective state government. The amount of tax varies from state to state, subject to a maximum limit of ₹2,500 per year as per Article 276 of the Constitution. This tax is allowed as a deduction under Section 16(iii) of the Income Tax Act while computing taxable salary. Example: If ₹2,500 is deducted annually as professional tax from an employee’s salary, the same amount is allowed as a deduction when calculating taxable income