Many salaried employees notice a small deduction called Professional Tax (PT) in their salary slip — and wonder:
👉 What exactly is it?
👉 Who pays it?
👉 Is it included in CTC or extra?
Let’s break it in the simplest possible way.
(Professional tax rules are created by individual state governments under India’s tax framework — not by banks or employers themselves.)
Quick Answer
Professional tax is a small state-level tax charged on salaried employees, professionals, and business owners. It is usually deducted monthly from salary and is included as part of your CTC, not extra over it.
What Is Professional Tax?
Professional Tax is a direct tax levied by state governments on people who earn income through:
✅ Salary
✅ Profession (doctor, CA, lawyer, freelancer)
✅ Business
Even though it’s called “professional,” salaried employees also pay it.
Each state sets:
• Its own tax slabs
• Monthly or yearly limits
(There’s a legal maximum of ₹2,500 per year in most states.)
Who Has to Pay Professional Tax?
✔ Salaried Employees
If you earn above your state’s minimum threshold.
✔ Self-Employed & Professionals
Such as:
• Doctors
• Lawyers
• Chartered Accountants
• Freelancers
• Shop owners
• Consultants
(Some must register and pay it themselves.)
Who Usually Doesn’t Pay?
Depending on state rules:
• Students
• Senior citizens (in some states)
• People earning below minimum income slab
• Disabled persons
Professional Tax Slab Example (Typical)
| Monthly Income | PT Deduction |
|---|---|
| Below ₹10,000 | ₹0 |
| ₹10,000–₹15,000 | ₹150 |
| Above ₹15,000 | ₹200 |
(Some states charge ₹300 in one month to cap at ₹2,500 yearly.)
👉 Slabs vary by state.
Is Professional Tax Part of CTC?
✅ YES — It is included in your CTC.
Your CTC (Cost to Company) includes:
✔ Basic salary
✔ Allowances
✔ Bonuses
✔ Employer benefits
✔ Professional tax
So when PT is deducted from your salary:
👉 It’s not extra tax — it’s already part of your salary structure.
Simple Example:
CTC: ₹5,00,000 per year
Includes:
• Gross salary
• PT of ₹2,400/year
Your in-hand salary is slightly lower because PT is deducted monthly.
Who Pays It to the Government?
For salaried employees:
👉 Employer deducts & deposits it
For self-employed:
👉 You pay directly to state tax department
Is Professional Tax Deductible in Income Tax?
✅ Yes!
You can claim Professional Tax as a deduction under Income Tax Act Section 16
So it reduces your taxable income slightly.
Common Myths
❌ It’s paid only by professionals → False
❌ It’s a central government tax → False (state tax)
❌ It increases your CTC → False (already included)
❌ It’s a big amount → False (small but mandatory)
Why Governments Collect Professional Tax
• Helps states fund public services
• Low burden per person
• Stable revenue source
Key Takeaways
✅ Professional tax is a state tax on income earners
✅ Salaried & self-employed both pay
✅ It’s included in your CTC
✅ Deducted monthly from salary
✅ Maximum usually ₹2,500 per year
✅ Tax-deductible under income tax
❓ FAQs –
1. Is professional tax compulsory?
Yes, if you fall in taxable slab of your state.
2. Is it deducted every month?
Usually yes — some states collect yearly in one month.
3. Can employer refuse to deduct it?
No — it’s legally required.
4. Do freelancers have to pay it?
Yes, in most states.
5. Is it same across India?
No — each state has different rules.
6. Does it affect income tax return?
It reduces taxable income slightly.
7. Is it refundable?
No.
8. Is it a big amount?
No — very small compared to income tax.
Final Simple Verdict
Professional tax is:
✔ A small mandatory state tax
✔ Paid by salaried & self-employed people
✔ Already part of your CTC
✔ Legally deductible
👉 It’s normal — nothing to worry about.
Published on : 21st February
Published by : SMITA
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