Definition
Professional Tax
Professional tax is a small tax levied by some state governments on salaried employees and professionals, deducted from salary and capped at a low annual maximum.
Professional tax (PT) is a state-level tax on income from employment, trades and professions, so it applies only in states that levy it (such as Maharashtra, Karnataka, West Bengal and others) and not in states that do not.
For salaried employees, the employer deducts PT from salary and remits it to the state. The amount is modest and the annual total is capped at a low statutory maximum. The PT paid is deductible from your salary income when computing taxable income.
Because rates and slabs vary by state, your PT deduction depends on where you work. It is a minor but routine line item on the payslip.
Related terms
- CTC vs Gross vs In-Hand SalaryCTC is the total cost a company bears for you, gross salary is your pay before deductions, and in-hand (net) salary is what actually reaches your bank after taxes and contributions.
- Basic PayBasic pay is the fixed core component of your salary on which many other components and statutory contributions — like HRA, PF and gratuity — are calculated.
- Form 16 (Parts A & B)Form 16 is the TDS certificate your employer issues for salary, with Part A showing tax deducted and deposited, and Part B detailing the salary breakup and deductions.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.