1 week ago
Professional Tax: Salary Deduction and ITR Claim Rules
Professional tax is a small tax charged by some state governments in India.
It can apply to employees and people who work for themselves, such as doctors or lawyers.
Employers usually take it from an employee’s salary and send it to the state government.
Self-employed people generally pay it themselves.
The yearly amount cannot be more than ₹2,500.
If you paid professional tax, you can usually subtract it from your taxable salary income.
This can reduce the income tax you owe.
The deduction is available when you use the old tax regime.
It is not available under the new tax regime.
Some states and union territories do not charge professional tax at all.
Professional tax is a state-level tax on eligible employment, professions and trades, and is usually deducted by employers.
The annual professional-tax liability cannot exceed ₹2,500, and not all Indian states and union territories levy it.
Employers deduct the tax from salaries and remit it to the relevant state government; self-employed individuals generally pay it directly.
Professional tax paid by an employee can be deducted from taxable salary income, including amounts paid in advance during the year.
The deduction under Section 16(iii) is available under the old tax regime, but not under the new tax regime.
- Who
- Eligible salaried employees, self-employed individuals and professionals such as doctors, lawyers and consultants; employers collect it from employees where applicable.
- What
- Professional tax is a state-level tax that may be deducted from salary or paid directly by self-employed individuals.
- Where
- In Indian states and union territories that levy professional tax.
- When
- It is generally deducted monthly, while the deduction is claimed for professional tax paid during the relevant financial year, including advance payments.
- Why
- State governments use the tax to fund civic infrastructure, local programs and public services.
Key facts
- Maximum annual amount
- Professional tax cannot exceed ₹2,500 per year under Article 276 of the Indian Constitution.
- Salary deduction
- Employers generally deduct professional tax from employees’ salaries and pay it to the relevant state government.
- Self-employed taxpayers
- Self-employed individuals generally pay professional tax directly to their respective state governments.
- Income-tax deduction
- Professional tax paid by an employee can be deducted from taxable salary income, even when paid in advance during the year.
- Relevant provision
- The deduction is available under Section 16(iii) of the Income-tax Act.
- Tax-regime restriction
- The deduction can be claimed under the old tax regime but not under the new tax regime.
- CTC treatment
- Professional tax is deducted from gross salary and is not part of an employee’s cost to company, or CTC.
Quotes
Income Tax Department
India’s government tax authority, cited through its official website
“Professional tax paid by the employee, by way of deduction from his salary, is allowed as a deduction from the taxable salary income. Even if paid in advance, the professional tax paid during the year is deductible from the salary income.”
livemint.com
Sources
Related news
Chennai Corporation sets September 30 deadline for professional tax remittance
How Salaried Employees Should Report Side-Business Income in Tax Returns
Freelancers Face August 31 ITR Deadline, Tax Questions Answered
Why Income Below ₹12 Lakh Can Trigger Tax Demands
Brazil-Based Architect’s Goa Fees May Face Indian Tax
Seven Freelancer Tax Filing Mistakes Before August 31 Deadline
EPFO Identifies PF Trusts Eligible for Amnesty Scheme 2026
EPFO Opens One-Time Amnesty for PF Trust Exemption Irregularities
Filing ITR: A Responsibility and Pride
Audit and Non-Audit Taxpayers Face Different ITR Deadlines
Who Must File Income-Tax Returns by 31 October?
