When starting a business or entering into employment in India, one encounters multiple statutory compliances, ranging from GST registration to income tax deduction. Among them is a lesser-discussed but equally important levy known as Professional Tax (PT). Despite its modest amount, capped at ₹2,500 per annum, PT carries significant compliance obligations and penalties for default.

Professional Tax is levied by State Governments on income earned by individuals through salaries, professions, trades, or callings. Unlike income tax (a Central levy under the Income-tax Act, 1961), PT is decentralised. Each State has the authority to frame its own legislation, rate structure, exemptions, registration process, and penalty provisions, subject only to the constitutional ceiling.

For employers, PT becomes an ongoing payroll responsibility deduction from employees’ salaries, timely remittance, and filing of periodic returns. For professionals and business entities, it is a direct annual liability that must be discharged under their enrolment. Thus, understanding PT is vital not just for compliance but also for accurate financial planning.

In this article, CA Manish Mishra talks about Professional Tax Registration in India: Process and Applicability.

Legal Framework

Constitutional Provisions

• Article 276(1) empowers State Legislatures to levy a tax on professions, trades, callings, and employments.

• Article 276(2) restricts the total amount payable by any person to a maximum of ₹2,500 per year.

• Originally, the limit was ₹250, but the Constitution (Sixtieth Amendment) Act, 1988 revised it upward to ₹2,500 in view of inflation and growing State revenue needs.

This ceiling applies uniformly across India; however, slabs, rates, and exemptions differ across States.

State-Specific Legislations

Some prominent legislations include:

• Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975

• Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976

• West Bengal State Tax on Professions, Trades, Callings and Employments Act, 1979

• Telangana (Adapted) Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987

Each Act specifies who is liable, thresholds for taxation, registration requirements, exemptions, return filing, and penalties.

States Without PT

Not all States impose PT. For example:

• Delhi, Haryana, Uttar Pradesh, Rajasthan, Goa, Punjab and most Union Territories (except Puducherry) do not levy PT.
  This patchwork makes compliance a state-specific obligation.

Applicability of Professional Tax

Who is Liable?

• Salaried Employees – PT is deducted monthly by the employer and deposited with the State treasury.

• Self-Employed Professionals – CAs, Lawyers, Doctors, Architects, Engineers, and Freelancers must enrol (PTEC) and pay PT annually.

• Business Entities – Proprietorships, Partnerships, LLPs, and Companies must obtain PTEC for themselves and PTRC to deduct for employees.

• Other Entities – HUFs, Societies, Trusts, and Cooperative Societies are also liable as “persons” under State laws.

• Directors & Partners – In some States (like Maharashtra), even non-salaried directors and partners must obtain enrolment and pay PT.

Exemptions (General Trends Across States)

• Senior Citizens (65 years or more) – Most States exempt senior citizens from Professional Tax as they are generally retired and not in active employment.

• Persons with Permanent Disability – Individuals with disabilities (blind, deaf, or ≥40% disability) are exempt under the Rights of Persons with Disabilities Act, 2016. In some States, parents/guardians of disabled children also get relief.

• Members of the Armed Forces – Army, Navy, and Air Force personnel are exempt from PT, as their income comes from Central Government service. A few States extend this to paramilitary forces too.

• Women Below Threshold – Some States give gender-based exemptions. For instance, Maharashtra exempts women earning up to ₹25,000 per month.

• Temporary/Badli Workers – Substitute workers, especially in textile industries, are exempt due to irregular and low earnings.

Types of Professional Tax Registration

Professional Tax (PT) registration is broadly divided into two categories depending on whether the liability is as an employer or as a professional/entity. Both registrations serve different purposes but are equally important for compliance.

Employer Registration (PTRC)

The Professional Tax Registration Certificate (PTRC) is required for employers who have salaried employees. Under State PT laws, an employer is responsible for deducting Professional Tax from employees’ salaries every month and remitting it to the State Government. This makes PTRC mandatory for every employer who has at least one employee earning above the minimum salary threshold specified in that State. For example, in Maharashtra, even if a company has only one employee earning ₹15,000 per month, the employer must obtain PTRC and deposit PT on behalf of that employee. The PTRC, therefore, is the legal authority that allows an employer to collect and remit PT to the treasury.

Enrolment Registration (PTEC)

The Professional Tax Enrolment Certificate (PTEC) is required for self-employed professionals, proprietors, partners, directors, and even companies themselves, regardless of whether they employ staff. Here, the liability is direct and annual, meaning the person or entity pays PT on their own income or status. For instance, a Chartered Accountant running an individual practice must obtain PTEC and pay ₹2,500 annually, even if he has no employees. Similarly, a Private Limited Company is treated as a separate “person” under PT law and must obtain PTEC to discharge its own liability.

In many States, especially Maharashtra, a company must obtain both PTEC and PTRC. PTEC covers the company’s liability as a legal entity, while PTRC covers its role as an employer responsible for deducting PT from employees. This dual registration ensures complete compliance from both perspectives.

Registration Process

Registering for Professional Tax (PT) is a structured process, but it differs slightly from State to State since PT is a state-level levy. Most States have shifted to online registration systems, which makes the process faster and transparent. Below is a step-by-step explanation:

Step 1: Identify State Requirement

The very first step is to determine whether Professional Tax is applicable in the State where your business or employees are located. Not all States levy PT for example, Delhi, Haryana, and Uttar Pradesh do not. On the other hand, States like Maharashtra, Karnataka, West Bengal, and Telangana make it mandatory. If your organisation has employees across multiple States, you must obtain separate registrations in each PT-levying State.

Step 2: Apply Online

Most States now require e-registration through their Commercial Tax Department or GST-integrated portals. Employers and professionals must create an account and submit their application online. For example:

• Maharashtra: mahagst.gov.in

• Karnataka: pt.kar.nic.in

• West Bengal: wbprofessiontax.gov.in

This online mode ensures faster processing, instant acknowledgment numbers, and in some cases, automatic approval.

Step 3: Prepare Documents

Applicants must upload relevant documents along with the registration form. These typically include:

• PAN and Aadhaar of the proprietor, partners, or directors.

• Incorporation Certificate / Partnership Deed for business proof.

• Address proof of the office, such as electricity bill, rent agreement, or NOC from the owner.

• Salary details of employees in case of Employer Registration (PTRC).

• Bank account details to establish financial credentials.

• Digital Signature Certificate (DSC) for authentication in the case of companies and LLPs.

These documents establish both the identity of the applicant and the legitimacy of the business.

Step 4: Verification

Once documents are uploaded, the system verifies them electronically. In most States, this happens via Aadhaar OTP or through Digital Signature Certificate (DSC). Some States may also conduct back-end validation with the Income Tax or MCA database.

• In Maharashtra, the process is entirely automated registration applications are usually auto-approved, and the certificates can be downloaded instantly without physical intervention.

Step 5: Obtain Certificate

After successful verification, the following certificates are issued:

• PTEC (Professional Tax Enrolment Certificate): For individuals, professionals, proprietors, and businesses to discharge their own annual liability.

• PTRC (Professional Tax Registration Certificate): For employers who are responsible for deducting PT from employees and remitting it to the State treasury.

In some States, both certificates are mandatory for example, in Maharashtra, every company must obtain both PTEC and PTRC to remain compliant.

Compliance and Returns

Once a business or professional obtains Professional Tax registration, the next important responsibility is ongoing compliance. This includes timely payment of tax, filing of returns, and availing deductions under the Income Tax Act.

Payment of Tax

The mode and frequency of payment vary depending on whether the taxpayer is an employer or a self-employed professional.

• Employees: In case of salaried persons, the employer is required to deduct Professional Tax from salaries every month based on the applicable slab and remit it to the State Government. For example, in Maharashtra, an employer must deduct ₹200 each month and ₹300 in February for an employee earning above the threshold.

• Self-Employed Professionals: Individuals such as Chartered Accountants, Lawyers, Doctors, Freelancers, and even Proprietors are directly liable to pay PT in their own capacity. For them, payment is usually annual, with the common due date being 30th June of the financial year, though this may vary across States.

Filing of Returns (Illustrative Examples)

Every registered person must file returns with the respective State authority within prescribed timelines. The periodicity depends on liability and State law.

• Maharashtra:

  • If annual PT liability exceeds ₹50,000, the employer must file monthly returns.

  • If liability is ₹50,000 or less, only one annual return is required.

• Karnataka:

  • Returns are filed monthly, with due date being the 20th of the following month.

  • For example, PT deducted in April must be reported and paid by 20th May.

• West Bengal:

  • Persons enrolled under PTEC (self-liability) file annual returns.

  • Employers under PTRC must file quarterly returns to report employee deductions.

These timelines are strictly monitored, and delays invite penalties and interest.

Deduction under Income Tax Act

Professional Tax, though a State levy, has direct relevance under the Income Tax Act, 1961.

• Section 16(iii): Permits salaried employees to claim deduction of the PT amount actually paid by them or on their behalf by the employer. This reduces their taxable salary income. For example, if an employee pays ₹2,500 PT annually, that amount is deducted before calculating income tax.

• Section 43B: Applies to businesses. It specifies that PT is allowable as a business expenditure only when it is actually paid, not when it is merely accrued in the books. This provision prevents companies from delaying PT payment while still claiming tax benefits.

Penalties and Interest

Professional Tax (PT) is a statutory obligation, and non-compliance attracts late fees, penalties, and interest under respective State laws. The quantum of penalty differs across States, but the guiding principle is the same: to enforce timely registration, deduction, and payment.

Maharashtra

Maharashtra imposes strict compliance measures under the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975.

• Late filing fee:

  • If the return is filed within 30 days of the due date → ₹200.

  • If the return is filed beyond 30 days → ₹1,000.

• Interest: Non-payment of PT attracts interest at 1.25% per month on the outstanding amount, calculated from the due date until payment.

• Penalty: In case of under-reporting, misreporting, or deliberate evasion, the penalty can range from 10% to 50% of the tax due. For example, if ₹10,000 is unpaid, the penalty may go up to ₹5,000 in addition to interest.

Karnataka

Karnataka’s law, under the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976, prescribes penalties both for failure to register and for delayed returns.

• Failure to register:

  • Non-employers (self-employed professionals, proprietors, etc.) → ₹1,000.

  • Employers (companies, firms, etc.) → ₹5,000.

• Delay in filing: A penalty of up to ₹250 per return is levied for late filing of returns.

• Interest: Just like Maharashtra, unpaid tax attracts interest at 1.25% per month until the liability is cleared.

General Liability Across States

• Employer’s Responsibility: If an employer deducts PT from employees’ salaries but fails to deposit it with the State Government, the employer becomes personally liable for the amount, along with interest and penalties. This is considered a serious violation, since the employer is withholding money from employees’ income.

• Repeated Defaults: In cases of habitual non-compliance, States may initiate prosecution under their Professional Tax Acts, which can lead to higher penalties or even criminal proceedings. Though rare, such action is possible in extreme cases of evasion.

Recent Updates

Professional Tax laws are State-specific, and each State periodically issues amendments to update thresholds, exemptions, and compliance procedures. Below are some of the latest and most important updates:

Maharashtra (2023)

In 2023, Maharashtra introduced progressive changes to its Professional Tax framework:

• Exemption for Women Employees: All women employees earning a salary of ₹25,000 per month or less are now completely exempt from paying Professional Tax. Earlier, the exemption was available only up to ₹10,000/month, so this revision has given substantial relief to working women in the lower-income segment.

• Alignment with the Disabilities Act, 2016: Exemptions for differently-abled persons were updated to bring them in line with the provisions of the Rights of Persons with Disabilities Act, 2016. This means that individuals with a disability of 40% or more, or specific disabilities recognized by the Act, are fully exempt from PT.

These reforms indicate Maharashtra’s intent to support both women and persons with disabilities.

Karnataka (2023)

Karnataka also revised its PT provisions in 2023 to simplify applicability:

• Higher Salary Threshold: PT is now applicable only to employees earning ₹25,000 per month or more. This means a large number of lower and middle-income employees are outside the PT net.

• Flat Rate: For those above the threshold, the tax is charged at a flat rate of ₹200 per month, instead of a slab system. This simplifies payroll processing for employers.

This update reduces compliance for both employees and businesses by making PT applicable only to higher salary brackets.

West Bengal (2025)

Effective 31 March 2025, West Bengal notified Consolidated Professional Tax Rules:

• All earlier scattered provisions have been streamlined into a consolidated framework.

• Mandatory digital filing and online payment has been introduced for all categories of taxpayers, including employers, professionals, and business entities.

• The move aligns with the State’s broader digital governance push, ensuring greater transparency and efficiency in tax compliance.

MCA Integration (SPICe+ & AGILE-PRO-S Forms)

A major compliance reform has been the integration of PT registration with company incorporation:

• Newly incorporated companies in Maharashtra, Karnataka, and West Bengal automatically receive PTEC (for their own liability) and PTRC (for deduction from employees) when registering with the Ministry of Corporate Affairs (MCA) through the SPICe+ and AGILE-PRO-S forms.

• This eliminates the need for separate PT registration applications after incorporation.

• It ensures that companies start their operations with statutory registrations in place, reducing delays and defaults.

State-Wise Comparison

Since Professional Tax (PT) is a State subject, every State that levies PT prescribes its own salary threshold, maximum liability, and special provisions. This leads to variations in compliance requirements depending on where the business or professional is located.

Maharashtra

• Threshold: Men earning more than ₹7,500/month are liable, while women enjoy exemption up to ₹25,000/month.

• Maximum PT: ₹2,500 per annum, as per the constitutional cap.

• Special Provision: Gender-based exemption women earning ≤ ₹25,000/month do not pay PT. This is a progressive step towards supporting female employees in lower and middle-income categories.

Karnataka

• Threshold: Only employees earning ₹25,000/month or above are liable.

• Maximum PT: ₹2,400 per annum (₹200/month).

• Special Provision: Karnataka has simplified compliance by fixing a flat rate of ₹200/month for all liable employees, unlike other States that follow slab-based deductions.

West Bengal

• Threshold: Employees become liable once monthly salary exceeds ₹10,001.

• Maximum PT: ₹2,400 per annum.

• Special Provision: West Bengal requires annual returns for enrolment (PTEC) and quarterly returns for employer registration (PTRC). This dual filing structure is unique compared to other States.

Telangana

• Threshold: Salaried employees earning above ₹15,000/month must pay PT.

• Maximum PT: ₹2,500 per annum.

• Special Provision: Telangana law provides specific exemptions for differently-abled persons, reflecting alignment with the Rights of Persons with Disabilities Act, 2016.

Gujarat

• Threshold: Liability begins when monthly salary exceeds ₹12,000.

• Maximum PT: ₹2,500 per annum.

• Special Provision: Gujarat follows separate slabs for different categories of persons, such as salaried employees, professionals, and traders, instead of a single unified slab.

Practical Insights

The legal provisions of Professional Tax (PT) is important, but applying them in day-to-day operations requires some practical awareness. The following insights highlight how businesses and professionals should manage PT compliance effectively.

Multiple States

If an organisation has employees working in different States that levy PT, it must obtain separate registrations in each State. For example, if a company has offices in Maharashtra, Karnataka, and West Bengal, it cannot operate with just one PTRC it must obtain a separate certificate for each State and comply with the local slab structure and filing requirements. This is because PT is a State-specific levy and not uniform across India.

Payroll Software

Modern payroll software and ERP systems are highly useful for employers. They can automatically calculate PT based on the income slabs applicable in each State and ensure accurate monthly deductions. This reduces the risk of errors in manual calculations and helps employers stay compliant with multiple State rules at once.

Professionals without Employees

Even professionals or business owners who do not employ staff are not exempt from PT liability. For example, a Chartered Accountant or a sole proprietor must still obtain a Professional Tax Enrolment Certificate (PTEC) and pay their own annual PT, usually ₹2,500 per year, depending on the State law. This ensures that compliance applies not just to employers but also to individuals in their professional capacity.

Display of Certificate

In most States, it is mandatory for employers to display their Professional Tax Registration Certificate (PTRC) at the place of business. This acts as proof of compliance and may be inspected by State tax officers during audits or inspections. Failure to display can attract penalties even if registration itself is in place.

Audit Impact

Professional Tax compliance is also reviewed during statutory audits and tax audits. Auditors check whether employers have:

• Obtained PTRC and PTEC where required.

• Deducted PT correctly from employees’ salaries.

• Remitted it on time.

• Filed the prescribed returns.

Any non-compliance flagged during audit can lead to qualifications in audit reports and may increase exposure to penalties from the tax department.

Judicial References

Judicial precedents have played an important role in clarifying the scope, validity, and treatment of Professional Tax (PT) under Indian law. Some key cases are:

Bangalore Water Supply v. A. Rajappa (1978)

In this landmark judgment, the Supreme Court gave an expanded interpretation of the term “industry” and “employment.” Although the case itself was not directly about PT, the Court’s broad definition of employment and professional activity indirectly strengthened the scope of PT. It confirmed that any systematic activity carried out by an employer with the help of employees can fall within the framework of employment, making it liable for Professional Tax if the State law so provides.

State of Karnataka v. Hansa Corporation (1981)

This case directly dealt with the constitutional validity of Professional Tax under Article 276 of the Constitution. The issue was whether PT was an excessive or invalid levy. The Supreme Court upheld the levy, stating that States have the power to impose PT, subject to the constitutional ceiling of ₹2,500 per annum. This judgment gave final legal backing to PT as a valid State subject, ensuring that challenges to its legitimacy would not succeed as long as States stayed within the prescribed limit.

Sadashiv Shankar Dhumal v. State of Maharashtra (2007)

In this case, the Bombay High Court clarified the tax treatment of PT under the Income-tax Act, 1961. It ruled that the Professional Tax paid by an employee is deductible from salary income under Section 16(iii) of the Act. This ensured that PT, being a compulsory levy on employment, is recognised as a legitimate deduction for income tax purposes, reducing the employee’s taxable salary.

Conclusion

Professional Tax (PT) is a state-specific levy with national relevance. Though capped at ₹2,500 annually, it carries strict compliance duties. Employers must obtain a PTRC, deduct PT from employees’ salaries, and remit it on time, while professionals, proprietors, and companies must secure PTEC and discharge their own annual liability.

Its legal foundation rests on Article 276 of the Constitution, respective State PT Acts and Rules, and Sections 16(iii) and 43B of the Income-tax Act, which allow PT deductions only on actual payment. Recent updates, such as Maharashtra’s exemption for women earning up to ₹25,000, Karnataka’s flat ₹200/month rate, and MCA’s integration of PT registration at incorporation, show reforms towards automation.

Frequently Asked Questions (FAQs)

Q1. What is Professional Tax and who levies it?

Ans. Professional Tax is a state-level tax on income from employment, profession, or trade. It is levied by State Governments under Article 276 of the Constitution, with a maximum cap of ₹2,500 per person per year.

Q2. Who needs to register for Professional Tax?

Ans. Employers must obtain a Professional Tax Registration Certificate (PTRC) to deduct PT from employees. Professionals, proprietors, and companies must obtain a Professional Tax Enrolment Certificate (PTEC) to pay their own annual liability.

Q3. Is Professional Tax applicable across all States in India?

Ans. No. Only certain States such as Maharashtra, Karnataka, West Bengal, Gujarat, and Telangana levy Professional Tax. States like Delhi, Haryana, and Uttar Pradesh do not.

Q4. What documents are required for Professional Tax registration?

Ans. PAN and Aadhaar of the applicant, Incorporation Certificate or Partnership Deed, address proof of business, employee salary details (for PTRC), bank account details, and DSC (for companies/LLPs).

Q5. What is the process for Professional Tax registration?

Ans. Registration is done online through State portals. Steps include: confirming applicability, submitting documents, Aadhaar/DSC-based verification, and downloading the PTEC/PTRC certificate once approved.

Q6. Are there exemptions from Professional Tax?

Ans. Yes. Senior citizens (65+), persons with permanent disabilities, members of the Armed Forces, women earning below thresholds (like up to ₹25,000 in Maharashtra), and temporary/badli workers are exempt in most States.

Q7. Can Professional Tax be claimed as a deduction under Income Tax?

Ans. Yes. Employees can claim it under Section 16(iii) of the Income-tax Act. For businesses, PT is deductible under Section 43B, but only on actual payment.

Q8. What are the penalties for non-compliance?

Ans. Penalties vary by State. Maharashtra imposes late fees of ₹200–₹1,000, interest of 1.25% per month, and penalties up to 50% of unpaid tax. Karnataka charges up to ₹5,000 for failure to register and ₹250 per delayed return.