Professional tax

Professional tax is a tax that a state government levies on professions, trades, callings and employments under Article 276 of the Constitution of India, and Article 276(2) caps it at Rs. 2,500 per person per year. Despite the name it falls on ordinary salaried employees, and a central government employee posted in a levying state pays it as a monthly deduction on the pay slip.

Liability follows the state of posting, not the employer. An employee posted in Mumbai or Bengaluru pays Rs. 2,500 a year at the top band; the same employee transferred to Delhi or Lucknow pays nothing, because those states have no professional-tax law. The office does the work: the Drawing and Disbursing Officer deducts the tax from the pay bill under Rule 17(1) of the Maharashtra Rules, 1975, or Rule 16(1) of the Karnataka Rules, 1976, and a central government office does not take a registration certificate at all.

For income tax the deduction survives in one regime only. Serial 1 of the Table in Section 19(1) of the Income-tax Act, 2025 allows the entire amount of professional tax actually paid, and Section 202(2)(a)(iv) strikes that serial out of the default new-regime computation. For the wider computation see income tax for government employees and the standard deduction.

Constitutional basis and the Rs. 2,500 ceiling

The whole power to levy this tax, and the whole limit on it, sit in Article 276 of the Constitution, read with Entry 60 of the State List. Clause (1) provides that a state law taxing professions, trades, callings or employments is not invalid merely because it is in effect a tax on income. Clause (2) sets the hard limit: the total tax payable in respect of any one person to the State, or to any one municipality, district board, local board or other local authority, shall not exceed Rs. 2,500 per year. Clause (3) provides that the state power does not limit Parliament’s power to tax income from the same professions and employments.

Clause (3) is why an employee pays professional tax to the state and income tax to the Centre on the same salary. The two levies are not alternatives and there is no set-off between them, only the income-tax deduction described below.

The ceiling has moved once. The Constitution as adopted capped the levy at Rs. 250 a year. The Constitution (Sixtieth Amendment) Act, 1988, which received the President’s assent on 20 December 1988, raised the figure to Rs. 2,500, and no amendment since has touched it. Nearly four decades of price inflation have therefore worked on a fixed number, which is why a tax that once cost a week of a clerk’s pay now costs a state’s top-band employee Rs. 208 a month at most.

Which states levy it, and under which Act

Professional tax is a state subject, so each state decides for itself whether to levy it, at what slabs, and through which department. Every levying state is bound alike by the Rs. 2,500 annual ceiling of Article 276(2), and every one of them writes its slabs as bands of monthly salary, with the sole common exception of Odisha, which uses bands of annual income.

The states and union territories that levy it include Andhra Pradesh, Assam, Bihar, Gujarat, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Meghalaya, Mizoram, Nagaland, Odisha, Punjab, Sikkim, Telangana, Tripura, West Bengal and the union territory of Puducherry. Delhi, Uttar Pradesh, Haryana, Rajasthan, Himachal Pradesh and Uttarakhand have no professional-tax Act, so a pay bill drawn in those states carries no such deduction.

Kerala and Tamil Nadu belong in a third category and are commonly misfiled into the first. Neither levies through a state professional-tax Act. In Kerala the levy is a local-body tax under the Kerala Municipality Act, 1994 and the Kerala Panchayat Raj Act, 1994, assessed half-yearly; in Tamil Nadu it sits in the municipal and panchayat legislation. The distinction is not academic for a central government employee, because the collecting authority, the assessment period and the return are those of the local body rather than a state commercial-tax department.

None of these lists is permanent. A state can introduce, amend or drop the levy by amending Act, and Karnataka did exactly that in 2025 when it raised its own annual total from Rs. 2,400 to Rs. 2,500. Treat the position as variable and confirm it with the commercial tax department of the specific state.

How a central government office collects it

A central government office deducts professional tax from the pay bill and remits it, and it does so without holding a registration certificate. Section 2(ba) of the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975, inserted by Maharashtra Act 21 of 1976, puts central employees inside the charge in terms. It defines “employee” to include:

a Government servant receiving pay from the revenues of the Central Government or any State Government or the Railway Fund; a person in the service of a body, whether incorporated or not, which is owned or controlled by the Central Government or any State Government, where the body operates in any part of the State, even though its headquarter may be outside the State.

Rule 17(1) of the Maharashtra Rules, 1975 names the officer who must act. The Drawing and Disbursing Officer is responsible for deducting the tax from the pay bill of a non-gazetted Government servant, and the Treasury Officer or the Pay and Accounts Officer for a gazetted one. The February pay bill may not be drawn until the tax for the whole March-to-February cycle has been deducted and a statement enclosed, which is the mechanism that makes the higher February figure work. The officer must furnish a certificate to the Commissioner not later than 30 April each year. Rule 16(1) of the Karnataka Rules, 1976 is worded the same way and carries the same 30 April certificate.

Two provisions explain why the office holds no registration. The proviso to Section 4 of each Act allows the State Government to prescribe by rules the manner in which an employer who is an officer of Government discharges the liability, and Section 5(1) of each Act requires a registration certificate only from an employer who is not an officer of Government. The office deducts and remits; it is not an assessee in the ordinary sense, and the “deemed assessee in default” provisions of Section 9(1) in Maharashtra and Section 11(1) in Karnataka are drawn to exclude it.

The employee is not discharged by the office’s failure. Rule 17(3) of the Maharashtra Rules and Rule 16(2) of the Karnataka Rules both provide that the liability of the employee does not cease until the tax is paid into the Government account, and the amount may be recovered from the employee where it was not deducted.

No constitutional immunity runs the other way. Article 285 immunises the property of the Union from state taxation and says nothing about employment, while Article 276(1) expressly saves a state employment tax from challenge as a tax on income. The clearest confirmation is legislative rather than judicial: Maharashtra had to enact express exemptions for Defence Services personnel in Section 27A(a) and for central armed police force personnel in Section 27A(h) precisely because central employees are otherwise within the charge. Those clauses would be surplusage if a bar existed.

Maharashtra slabs, and the Rs. 300 month

Maharashtra charges a man Rs. 200 a month above a monthly salary of Rs. 10,000, and Rs. 300 for the month of February, so the year totals exactly Rs. 2,500. The February figure is not a departmental convention. It is written into column (3) of Schedule I entry 1 of the 1975 Act, as substituted by Section 3 of the Maharashtra State Tax on Professions, Trades, Callings and Employments (Amendment) Act, 2023 (Maharashtra Act No. XIX of 2023), published in the Maharashtra Government Gazette on 6 April 2023 and in force from 1 April 2023.

Source: Schedule I entry 1, Maharashtra Act XVI of 1975, as substituted by Maharashtra Act No. XIX of 2023 with effect from 1 April 2023.

The women’s threshold is the newer half of that table and it is generous by the standards of the levy. A woman pays nothing until her monthly salary passes Rs. 25,000, a line raised from Rs. 10,000 by the same 2023 amendment. For a central government office in Maharashtra the practical consequence is that a woman in the lower pay levels of the pay matrix can drop out of the deduction entirely, while her male colleague on identical pay does not.

Karnataka after the 2025 amendment

Karnataka now reaches the same Rs. 2,500 as Maharashtra, and it did so only from 1 April 2025. The Karnataka Tax on Profession, Trades, Callings and Employments (Amendment) Act, 2025 (Karnataka Act No. 33 of 2025) received the Governor’s assent on 10 April 2025 and was published in the Karnataka Gazette Extraordinary on 15 April 2025, with Section 1(2) bringing it into force with effect from 1 April 2025. Its whole operative content is one substitution in column (3) of serial 1 of the Schedule: Rs. 200 a month except for February, and Rs. 300 for February. The Statement of Objects and Reasons gives the purpose plainly, to increase the rate of tax from Rs. 2,400 to Rs. 2,500 per annum. Until 31 March 2025 Karnataka charged a flat Rs. 200 for twelve months and stopped at Rs. 2,400.

The Rs. 25,000 exemption threshold is older and comes from a different Act. Karnataka Act No. 14 of 2023, assented on 13 March 2023 and published in the Karnataka Gazette Extraordinary on 14 March 2023, substituted the whole Schedule with effect from 1 April 2023 and set serial 1 at salary or wage earners drawing Rs. 25,000 and above for a month. The previous threshold, Rs. 15,000, had run from 1 April 2015 under Karnataka Act 14 of 2015. Attributing the Rs. 25,000 line to the 2025 amendment is a common error and conflates two separate Acts two years apart.

Karnataka carries an age exemption that Maharashtra sets five years higher. The first proviso to Section 3(2), substituted by Karnataka Act 06 of 2018 with effect from 1 April 2018, provides that no tax is payable by individuals who are senior citizens having attained the age of 60 years. A second proviso, in place since 27 July 1982, exempts a person who exercises a profession for not more than 120 days in the year.

Four states compared, and the routes to the same ceiling

Every levying state ends at Rs. 2,500 or just below it, and the arithmetic by which each gets there differs. The table below is a salary-calculator.in construction, assembled from the four state Acts named in the source line, and it is the fastest way to see that the constitutional ceiling, not state policy, sets the top figure.

Odisha is the state that breaks the monthly-band pattern. Its bands are annual gross income: nothing below Rs. 1,60,000, Rs. 125 a month between Rs. 1,60,000 and Rs. 3,00,000, which is Rs. 1,500 a year, and Rs. 200 a month for eleven months with Rs. 300 in the last month above Rs. 3,00,000. Entry 1 of the Odisha schedule expressly names Ministers, Members of the Legislative Assembly and Members of Parliament from the State among the persons liable. Deduction and deposit are monthly and the return is annual and online only.

Assam takes the simplest route of the four and lands Rs. 4 short of the ceiling by design. Its schedule, effective 15 October 2014, charges nothing up to Rs. 10,000 a month, Rs. 150 up to Rs. 15,000, Rs. 180 up to Rs. 25,000 and Rs. 208 a month at Rs. 25,000 and above, which totals Rs. 2,496 a year with no higher month at all. Two provisos in the Assam schedule are worth knowing: a recipient of a cultural, literary or sports pension pays nothing under the Act, and societies providing education to physically and mentally challenged persons are exempt.

Exemptions that reach a central government employee

Three Maharashtra exemptions matter more to a central government reader than anything else in the Act, and one of them changed as recently as 1 September 2024.

Section 27A(a) exempts members of the forces under the Army Act, 1950, the Air Force Act, 1950 and the Navy Act, 1957 who serve in the State and draw pay under Defence Services budgetary allocations, including auxiliary forces and reservists. An Explanation inserted by Maharashtra Act 51 of 2000 narrows it: from 1 May 2000 the exemption does not apply to persons drawing pay from Defence Ordnance Factories. An ordnance factory employee in Maharashtra therefore pays, while a serving soldier posted in the same state does not.

Section 27A(h) covers the central armed police forces, and it was widened in 2024. As substituted by Section 5 of the Maharashtra Tax Laws (Amendment) Act, 2024 (Maharashtra Act No. XXXII of 2024), assented on 31 July 2024 and brought into force on 1 September 2024 by Finance Department Notification No. PTA-2024/C.R.19/Taxation-3 dated 9 August 2024, it exempts armed members serving in the State of the CRPF, BSF, CISF, NSG, ITBP, Assam Rifles and the Sashastra Seema Bal. The clause it replaced, in force from 1 April 2016, had named only the CRPF and the BSF, so a CISF or ITBP employee posted in Maharashtra was liable until 31 August 2024 and is not liable now.

Section 27A(c) was rewritten on the same date as the slab table. From 1 April 2023, by Section 2(1) of Maharashtra Act 19 of 2023, the disability exemption runs to any person with a benchmark disability as defined in Section 2(r) of the Rights of Persons with Disabilities Act, 2016, and it now also covers a parent or guardian of a child with a benchmark disability. The older formulation, a permanent physical disability of not less than 40%, no longer states the test. The certificate is produced once, for the first year in which the exemption is claimed.

The remaining Maharashtra exemptions are narrower: badli workers in the textile industry under Section 27A(b), women engaged exclusively as agents under the Mahila Pradhan Kshetriya Bachat Yojana under Section 27A(d), and persons who have completed the age of 65 years under Section 27A(f), a clause operative from 17 August 1992.

What the tax is charged on, and what an arrear does

The base is gross salary, not basic pay, and the two Acts differ on what gross includes. Section 2(h) of the Maharashtra Act defines salary or wage to include pay or wages, dearness allowance and all other remuneration received on a regular basis, whether in cash or in kind, together with perquisites and profits in lieu of salary, while excluding bonus in any form and on any account, and gratuity. For a central government employee that means basic pay plus dearness allowance plus house-rent allowance plus transport allowance, which puts every employee above Level 1 well past the Rs. 10,000 line.

Section 2(j) of the Karnataka Act, substituted by Karnataka Act 15 of 1989 with effect from 1 April 1987, is drawn more widely and then softened by two Explanations. It includes any amount received by way of arrears of salary or bonus, and then provides that a bonus is spread over the twelve months of the year, or over the months to which it relates, and that arrears of salary are spread over the relevant months to which they relate.

The practical consequence is a clean contrast. In Karnataka an arrear on a pay revision does not push an employee into a higher band in the month of payment, because the Act sends the money back to the months it belongs to. In Maharashtra there is no spreading rule, so the arrear enters the salary of the month in which it is drawn. The effect is confined to salaries near a threshold: above Rs. 10,000 for a man in Maharashtra, and above Rs. 25,000 for a woman there or for anyone in Karnataka, the band is flat and a larger salary changes nothing. The income-tax analogue, Section 157 relief on arrears, has no counterpart in either state Act.

Both definitions borrow the meaning of perquisites and profits in lieu of salary from Section 17 of the Income-tax Act, 1961, which was repealed with effect from 1 April 2026. The reference now has to be read through Section 8 of the General Clauses Act, 1897 as a reference to the corresponding provision of the Income-tax Act, 2025, and neither state has yet amended its definition.

Pensioners

A pension is outside the charge in both Maharashtra and Karnataka, and the reason is structural rather than an exemption clause. Entry 1 of the Schedule in each Act charges salary and wage earners, and each Act defines salary or wage by reference to the remuneration of employment, so a pension paid after retirement is not caught by the entry at all.

Two express exemptions then cover most pensioners a second time. Karnataka exempts every individual aged 60 or above under the first proviso to Section 3(2) with effect from 1 April 2018, and Maharashtra exempts persons who have completed 65 years under Section 27A(f). Assam exempts a recipient of any cultural, literary or sports pension by a proviso in its own schedule.

The exposure that remains is a second career. A central government pension holder who takes up a profession, trade or calling after retirement can fall within one of the other entries of the state Schedule, which charge professionals and traders on enrolment rather than through an employer. Liability there is the pensioner’s own, not a Drawing and Disbursing Officer’s.

Due dates, returns, interest and penalty

Maharashtra sets the return frequency by the size of the previous year’s liability. Rule 11 of the Maharashtra Rules, as substituted in 1993, requires an annual return by 31 March of the year to which it relates where the previous year’s liability was less than Rs. 1,00,000, and a monthly return by the last date of the month in every other case. The Rs. 1,00,000 line replaced Rs. 50,000 by Finance Department notification dated 6 June 2019. The return is Form III, or Form III-B filed electronically with challan MTR-6, and the tax is payable by the same date as the return. An enrolled person, as distinct from an employer, pays for the year by 31 March under Section 8(2).

Karnataka works on shorter cycles. Section 6 requires an annual return within sixty days of the expiry of the year, and Section 6A a monthly statement, with payment, within twenty days of the expiry of the month.

The Karnataka figures moved together in one amending Act. Sections 3 to 6 of Karnataka Act 14 of 2023, all effective 1 April 2023, raised the interest from 1.25% to 1.5% a month to align it with the GST Act, cut the penalty from a discretionary figure not exceeding 50% to a flat 10%, cut the escaped-assessment penalty from one and a half times the tax to 100% of it, and reduced the deductor’s default interest from 2% to 1.5% a month. The 2023 amendment also deleted the words “without reasonable cause” from Section 12, so the 10% penalty now attaches whether or not a reason is shown.

Income-tax treatment: serial 1 of the Section 19(1) Table

Professional tax actually paid during the year is deductible in computing income under the head “Salaries”, at serial 1 of the Table in Section 19(1) of the Income-tax Act, 2025. The entry allows a deduction for a sum paid by the assessee as a tax on employment as per article 276(2) of the Constitution, leviable by or under any law, and the amount-of-deduction column reads “Entire amount”. There is no separate monetary cap in the serial, because Article 276(2) has already limited the payment to Rs. 2,500 a year.

Where the office pays the employee’s professional tax rather than deducting it, the amount is taxed twice over in form and once in substance. It is a perquisite under Section 17(1)(f) of the Income-tax Act, 2025, being a sum paid by the employer in respect of an obligation which but for the payment would have been payable by the assessee, and the same amount is then allowed at serial 1. The net effect on taxable income is nil in the old regime and positive in the new one.

The regime is the operative point. Section 202(2)(a)(iv) requires total income under the default new regime to be computed without the deduction at serial 1 of the Section 19(1) Table, and serial 1 is the only entry in that Table which the sub-clause removes. The standard deduction at serial 2 survives in both regimes, at Rs. 75,000 where tax is computed under Section 202(1) and Rs. 50,000 in any other case. The third deduction of the old Section 16 family, the entertainment allowance at Section 16(ii) of the repealed 1961 Act, has no counterpart in the 2025 Act and is unavailable in either regime from 1 April 2026.

So an employee on the new tax regime still pays professional tax to the state, because that liability is entirely separate from the income-tax regime, and gets no deduction for it. The same employee on the old tax regime both pays it and deducts it, which at the 30% slab is worth Rs. 750 of tax on a Rs. 2,500 payment. The old versus new regime choice therefore changes the deductibility and never the state liability. The deduction is reported in the salary certificate the office issues, now Form No. 130 under rule 215(1) of the Income-tax Rules, 2026, which replaced Form 16.

Common errors

• Confusing professional tax with income tax on professional income. Professional tax is a state levy under Article 276; income tax is a central levy under the Income-tax Act, 2025. Article 276(3) confirms both apply to the same salary.
• Thinking only professionals pay it. The name misleads, because the charge covers employments, so an ordinary salaried government employee is squarely within it.
• Expecting more than Rs. 2,500. The cap is constitutional and applies per person per state per year, whatever the salary. Assam charges Rs. 2,496 and no state charges more.
• Reading the Maharashtra slab as gender-blind. Since 1 April 2023 a woman pays nothing up to Rs. 25,000 a month while a man pays from Rs. 7,501.
• Crediting Karnataka’s Rs. 25,000 threshold to the 2025 amendment. The threshold is from Karnataka Act 14 of 2023; Act 33 of 2025 added only the Rs. 300 February month.
• Expecting a deduction under the new regime. Serial 1 of the Table in Section 19(1) of the Income-tax Act, 2025, which replaced Section 16(iii), is old-regime only, because Section 202(2)(a)(iv) removes it from the new-regime computation.
• Assuming it applies everywhere. Delhi, Uttar Pradesh, Haryana, Rajasthan, Himachal Pradesh and Uttarakhand have no professional-tax Act, and in Kerala and Tamil Nadu the levy belongs to the local body rather than to a state Act.
• Assuming a central employer removes the liability. Section 2(ba)(i) of the Maharashtra Act names Government servants paid from the revenues of the Central Government, and liability follows the state of posting.
• Assuming the employee is safe if the office forgets. Rule 17(3) of the Maharashtra Rules and Rule 16(2) of the Karnataka Rules keep the liability with the employee until the tax reaches the Government account.

Related Articles

• TDS on salary (Section 192)
• Income tax for government employees
• Standard deduction
• Old tax regime
• New tax regime
• Old vs new tax regime
• Deductions allowed in the new tax regime
• Income-tax Act 2025
• Income tax slabs for AY 2027-28
• Section 157 relief
• Entertainment allowance
• Form 16
• Take-home salary for central government employees
• Drawing and Disbursing Officer
• House-rent allowance
• Dearness allowance
• Transport allowance
• Central government pension
• Central Board of Direct Taxes
• Central government employees in India
• Minimum pay
• Pay matrix
• National Pension System
• General Provident Fund
• Gratuity for central government employees
• Leave encashment
• Family pension
• Pension calculation
• Department of Personnel and Training
• HRA exemption calculator
• Department of Expenditure
• Income tax calculator
• 7th CPC salary calculator

External references

• India Code, the Government of India repository of central and state legislation
• Maharashtra Goods and Services Tax Department
• Department of Parliamentary Affairs and Legislation, Government of Karnataka
• Commissionerate of CT and GST, Odisha
• Taxation Department, Government of Assam
• Income Tax Department, e-filing portal
• The Gazette of India

References

1. Constitution of India, Article 276 (taxes on professions, trades, callings and employments), clauses (1) to (3), read with Entry 60 of List II of the Seventh Schedule.
2. The Constitution (Sixtieth Amendment) Act, 1988, assent 20 December 1988, raising the Article 276(2) ceiling from Rs. 250 to Rs. 2,500 per year.
3. Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975 (Maharashtra Act XVI of 1975), Sections 2(ba), 2(h), 4, 5, 6(3), 8(2), 9, 10 and 27A, and Schedule I entry 1 as substituted by the Maharashtra Amendment Act, 2023 (Maharashtra Act No. XIX of 2023), gazette 6 April 2023, effective 1 April 2023.
4. Maharashtra State Tax on Professions, Trades, Callings and Employments Rules, 1975, Rule 11 (returns), Rule 11C-1 (interest, effective 1 May 2017) and Rule 17 (deduction by the Drawing and Disbursing Officer, Treasury Officer or Pay and Accounts Officer).
5. Maharashtra Tax Laws (Amendment) Act, 2024 (Maharashtra Act No. XXXII of 2024), Section 5, substituting Section 27A(h), brought into force on 1 September 2024 by Finance Department Notification No. PTA-2024/C.R.19/Taxation-3 dated 9 August 2024.
6. Karnataka Tax on Profession, Trades, Callings and Employments Act, 1976, Sections 3(2), 5, 6, 6A, 9, 10, 11 and 12 and the Schedule, as amended by Karnataka Act No. 06 of 2018 (senior citizens, effective 1 April 2018), Karnataka Act No. 14 of 2023 (Rs. 25,000 threshold and the interest and penalty revisions, gazette 14 March 2023, effective 1 April 2023) and Karnataka Act No. 33 of 2025 (the Rs. 300 February month, assent 10 April 2025, gazette 15 April 2025, effective 1 April 2025).
7. Karnataka Tax on Profession, Trades, Callings and Employments Rules, 1976, Rule 16 (deduction from the pay bill of a Government servant and the 30 April certificate).
8. Odisha State Tax on Professions, Trades, Callings and Employments Act, 2000, and the rate chart published by the Commissionerate of Commercial Taxes and GST, Odisha.
9. Assam Professions, Trades, Callings and Employments Taxation Act, 1947, Schedule of rates with effect from 15 October 2014, published by the Taxation Department, Government of Assam.
10. Income-tax Act, 2025: Section 17(1)(f) (a sum paid by the employer to discharge an obligation of the employee), Section 19(1) Table serial 1 (tax on employment under article 276(2), entire amount) and serial 2 (standard deduction), and Section 202(2)(a)(iv) (serial 1 excluded from the default regime); Income-tax Rules, 2026, rule 215(1) (Form No. 130). The corresponding provisions of the repealed Income-tax Act, 1961 were Sections 17(2)(iv), 16(iii), 16(ia) and 115BAC.