Professional tax: meaning, limit and who pays
Professional tax is a state tax on professions, trades and employment, capped at ₹2,500 a year per person. Employers deduct it from salaries.
Short answer
Professional tax is a tax levied by some state governments on persons earning income from professions, trades, callings and employment. Article 276 of the Constitution caps it at ₹2,500 per person per year. Employers in states that levy it must register, deduct the tax from employees' salaries and deposit it, and businesses and professionals pay it for themselves.
- Constitutional basis
- Article 276
- Maximum
- ₹2,500 per person per year
- Levied by
- Some states, not all
- Employer duty
- Deduct from salaries and deposit
How professional tax works
Each state that levies professional tax has its own Act, slabs and due dates. Employers obtain an employer registration to deduct and pay the tax on employees' salaries, and an enrolment to pay the tax on the business itself. In Maharashtra these are known as the PTRC and PTEC. Rates usually depend on monthly salary slabs, with lower salaries exempt. States such as Maharashtra, Karnataka, West Bengal, Tamil Nadu and Gujarat levy professional tax, while several others, including Delhi, do not.
Compliance and income-tax treatment
Employers file periodic returns, monthly, quarterly or annually depending on the state and the amount of tax. Late payment attracts interest and penalties under the state Act. For employees, professional tax paid is deductible from salary income under the income-tax law, and for businesses it is generally an allowable business expense.
Why it matters for startups
A startup with employees in more than one state must register in each state that levies the tax, based on where employees work. Through SPICe+, some states issue professional tax registration at incorporation. Configure payroll for state-specific slabs, and check registration needs whenever you open an office or hire remote staff in a new state. Keep challans and returns for each state, because inspections can cover several past years.
Related services
Sources
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Is professional tax payable in every state?
No. Only some states levy it, and rates and rules differ among them.
What is the maximum professional tax per year?
₹2,500 per person per year, as capped by Article 276 of the Constitution.
Can professional tax be claimed as a deduction?
Yes. Employees can deduct it from salary income, and businesses can generally claim it as an expense.