Archive · 22 Aug 2026
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.
- When
- It is generally deducted monthly, while the deduction is claimed for professional tax paid during the relevant financial year, including advance payments.
- Where
- In Indian states and union territories that levy professional tax.
- Why
- State governments use the tax to fund civic infrastructure, local programs and public services.
- 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.