What is professional tax?
Professional tax is a tax on income earned from employment, a trade, a calling or a profession. It is imposed by state governments and municipal bodies, not by the central government, which is why an employee in Karnataka and an employee in Delhi on identical salaries can have different deductions on the same payslip.
For salaried staff the employer withholds the amount monthly and remits it to the state. Self-employed professionals pay it themselves, usually annually.
Which states levy professional tax?
Roughly half the states and union territories charge it. The list includes Maharashtra, Karnataka, West Bengal, Tamil Nadu, Andhra Pradesh, Telangana, Gujarat, Madhya Pradesh, Kerala, Odisha, Assam, Bihar, Jharkhand, Meghalaya, Tripura, Sikkim, Nagaland, Manipur, Mizoram and Puducherry.
States that do not levy it include Delhi, Haryana, Uttar Pradesh, Uttarakhand, Rajasthan, Punjab (which levies a development tax instead), Himachal Pradesh, Goa, Chhattisgarh, Jammu and Kashmir, and the Andaman and Nicobar Islands.
Treat any such list as a starting point rather than a settled answer. States add, drop and amend the levy, and Kerala administers it through local bodies with municipality-level variation. Confirm against the current state notification before configuring payroll.
How much professional tax is deducted?
Each state publishes its own slab table keyed to monthly gross salary. Karnataka and Maharashtra, for example, both work out to about 200 rupees a month at the top slab, but their thresholds and their treatment of lower salaries differ, and Maharashtra charges a different amount in February to reconcile the annual total.
Whatever the state, one ceiling binds all of them: article 276(2) of the Constitution caps what a state may levy on a person on account of a tax on professions, trades, callings or employments, and the Income-tax Act, 2025 refers to that article expressly when allowing the deduction. The amount of the cap is not stated here, because the Constitution has not been read for this entry and is not recorded in this site's source registry. It is the reason the amounts in state slab tables cluster where they do, and it should be confirmed from the article before being relied on.
Some states also vary the amount by gender or exempt certain categories such as senior citizens, parents of a child with a disability, or members of the armed forces. These exemptions are state-specific.
What are the employer's registration and filing duties?
An employer with staff in a state that levies the tax generally needs two registrations, though the naming differs by state. Maharashtra uses the clearest labels:
| Registration | Covers |
|---|---|
| Enrolment certificate (PTEC) | The entity's own liability as a business |
| Registration certificate (PTRC) | Tax deducted from employees' salaries |
Filing frequency depends on the state and often on the size of the employer's liability, so the same company can file monthly in one state and annually in another. Returns and payment are made through the state commercial tax portal.
A company operating in several states has to register separately in each one, track several slab tables, and meet several due dates. This is the part that breaks spreadsheet payroll first.
How does professional tax affect income tax?
Professional tax is deductible in computing income under the head Salaries, so it reduces taxable salary rather than being an additional cost to the employee. From tax year 2026-27 the provision is section 19(1) of the Income-tax Act, 2025, at serial number 1 of its table: tax on employment within the meaning of article 276(2) of the Constitution, deductible in its entire amount.
Do not cite section 16 for this, and treat with suspicion anything that does. Under the repealed Income-tax Act, 1961 section 16 carried the deductions from salary, which is why that citation is everywhere. Under the 2025 Act section 16 is the DEFINITION of salary, and the deductions moved to section 19. The number survived and its meaning did not, so a citation to section 16 reads as correct while pointing at the wrong provision. This entry made that error until it was checked against the enacted text.
Two things this entry does not tell you. Whether the deduction runs on a paid basis rather than an accrual basis is not part of the provision as read, so an employee whose employer deducted the tax but did not remit it should take advice rather than rely on a general rule stated here. And whether the deduction is available where income-tax is computed under section 202(1) is not stated either: section 202 is on the Finance Act, 2026 amended-section list and that interaction has not been checked.
What happens if an employer does not deduct or pay?
Liability sits with the employer, not the employee. A company that fails to deduct professional tax still owes the amount, and states levy interest on late payment plus a penalty for late registration or non-filing. Rates and penalty amounts are set state by state.
The practical risk is that this accumulates quietly. Professional tax is small per employee per month, so an incorrect slab or a missed state registration can run for a year or more before anyone notices, by which time the arrears cover the whole workforce.
Statutory reference
- Act
- State professional tax legislation, with the Income-tax Act, 2025
- Section
- Article 276(2) of the Constitution (ceiling); Section 19(1) Table Sl. No. 1 of the Income-tax Act, 2025 (tax on employment within the meaning of article 276(2) of the Constitution, deductible in its entire amount in computing income under the head Salaries). Section 19 is the provision to read, not Section 16: the 2025 Act's Section 16 defines salary, where the repealed Act's Section 16 carried the deductions
- Key limits
- Serial number 1 of the s. 19(1) salary deduction table of the Income-tax Act, 2025 allows the entire amount of tax on employment within the meaning of article 276(2) of the Constitution, and s. 19 is absent from the Finance Act, 2026 amended-section list, so the table stands as enacted. That is the repealed 1961 Act's numbering. In the 2025 Act s. 16 is the DEFINITION of salary and the deductions sit at s. 19. The entry now carries the warning instead of the error. The paid-basis claim and the assertion about how the deduction interacts with the chosen regime have been withdrawn, since neither is in the provision as read and s. 202 is on the Finance Act amended list. The article 276(2) figure has been withdrawn because the Constitution is not recorded in the registry. No state professional tax enactment is recorded, so the slab amounts, the lists of levying and non-levying states, the Maharashtra February reconciliation, the registration labels, the filing frequencies, the exemptions and the interest and penalty positions are all presented as a starting point to confirm against the current state notification, which is what the body says.
Frequently asked questions
Is professional tax the same in every state?
No. Each state sets its own slabs, due dates and exemptions, and several states do not levy it at all. The only common rule is the constitutional ceiling of 2,500 rupees per person per year.
Who pays professional tax, the employer or the employee?
For salaried staff the employee bears the cost, but the employer deducts it from salary and is legally responsible for paying it to the state. If the employer fails to deduct, the liability stays with the employer.
Is professional tax deducted from gross or net salary?
The slab that applies is usually determined by gross monthly salary, and the tax is then deducted as part of the deductions section on the payslip, reducing net pay.
Can professional tax be claimed as a deduction in income tax?
Yes. From tax year 2026-27 the deduction is at serial number 1 of the section 19(1) table of the Income-tax Act, 2025, which allows the entire amount of tax on employment within the meaning of article 276(2) of the Constitution. Cite section 19 rather than section 16: under the repealed 1961 Act section 16 carried the salary deductions, but under the 2025 Act it defines salary. Whether the deduction runs on a paid basis rather than an accrual basis is not part of the provision as read, so take advice where the employer deducted the tax and did not remit it.
Does an employer need to register in every state where it has employees?
Yes, in every state that levies the tax. Registration is state-specific, so a company with staff in four levying states needs four registrations and has to meet four sets of due dates.
Do remote employees pay professional tax based on where they live or where the office is?
It generally follows the state in which the employee is deemed to work, which for remote staff is usually their location rather than the registered office. Practice varies, so confirm the position with the relevant state before setting up payroll for a distributed team.
How Engage helps with professional tax
Engage holds the slab table for every state that levies professional tax and applies the right one based on each employee's work location, so a payroll spanning several states does not need parallel spreadsheets. Deductions appear on the payslip, and state-wise liability is summarised for filing. State-by-state slabs and due dates are also documented in our professional tax guides.
See state-wise professional tax