06 November 2008
Professional tax is levied by state governments or local bodies on professions, trades, callings and employment. The power to levy the tax flows from Article 276 of the Constitution that also caps the tax amount. The Centre will amend Article 276 to raise the limit. Although Delhi does not impose the tax, states such as Karnataka, Maharashtra, West Bengal, Andhra Pradesh, Tamil Nadu and Gujarat do so.
The limit was fixed in 1998 at Rs 2,500 per annum. Increase in tax has been a long-pending demand of the states, pointing at rise in income levels in the past few years.
The Centre’s reluctance to state governments’ demand for a hike in the limit is borne out of the fact that taxpayers who pay professional tax are eligible for a deduction under the Income-Tax Act. So, while the state governments’ revenues grow, the Centre loses tax on this count.
06 November 2008
Professional tax paid by a salaried employee is deductible u/s 16(iii). This tax differs from state to state. There is no professional tax in Union Territories. It can be advantageous for all companies to distribute salary on all-India basis from the Union Territory of Delhi where tax is nil! In the state of Maharashtra the following persons are exempt from professional tax:
1. Members of army, air force, navy and related auxiliary forces or reservists. 2. Persons on establishment of defence ordnance factories. 3. Badli workers in textile industry. 4. Persons with permanent physical disability including blindness. 5. Parents or guardian of any person suffering from a physical disability or mental retardation. 6. Women exclusively engaged as agents under MPKBY scheme of directorate of small savings. 7. Persons who have completed age of 65 years.
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