Professional tax rarely exceeds ₹200 a month per employee, which is exactly why it gets neglected. It is also state-administered, which means an employer in four states has four sets of rules, rates and filing cycles.
What it is
Professional tax is a state levy on income from employment, trade or profession. It is capped at ₹2,500 per person per year by constitutional limit. States that levy it include Maharashtra, Karnataka, West Bengal, Tamil Nadu, Andhra Pradesh, Telangana, Gujarat, Madhya Pradesh, Assam, Odisha, Kerala, Bihar and others. Several states, including Delhi, Haryana, Uttar Pradesh and Rajasthan, do not levy it at all.
How much, and on what basis
Rates are slab-based on monthly gross salary, and the slabs differ by state. As an illustration of the structure rather than a current rate table:
- Maharashtra has historically used slabs rising to ₹200 per month, with ₹300 in February to reach the ₹2,500 annual cap, and an exemption for women below a specified salary
- Karnataka applies a flat monthly amount above a salary threshold
- West Bengal uses multiple slabs rising with salary
- Tamil Nadu assesses on a half-yearly basis rather than monthly
Rates and thresholds are revised periodically. Verify the current notification for each state you operate in rather than relying on a summary.
The question most employers get wrong: which state applies?
Professional tax follows the place of work, not the location of your head office, your payroll team, or the employee's home state.
- An employee working in your Bengaluru office is subject to Karnataka PT, even if payroll runs from Mumbai
- An employee working in a state with no PT has no PT deduction, even if the company is registered elsewhere
- For fully remote employees, the position generally follows the location from which they work; take advice, as state practice varies and this is an area of genuine ambiguity
Registration and filing
- Register in each state where you have employees working, within the prescribed period of becoming liable — usually 30 days
- Enrol the entity separately for its own liability
- Deduct from salary monthly, per the applicable state slab
- Remit and file per the state cycle — monthly in most states, with some annual or half-yearly depending on liability size
Penalties are modest in absolute terms — typically interest plus a penalty for late registration or filing — but they accumulate across states and years, and non-registration is an easy finding during inspection.
Common errors
- Applying the head office state's PT to all employees regardless of work location
- Registering as an employer but never enrolling the entity
- Missing registration in a state after opening a small office or hiring one remote employee there
- Not updating the applicable state when an employee transfers location
- Using stale slab rates after a state revision
- Forgetting the February adjustment in states that use one to reach the annual cap
Practical handling
- Hold a work-state field against every employee, distinct from their home address and from the payroll entity
- Maintain a register of your PT registrations and enrolments by state, with filing cycles
- Trigger a review whenever you hire in a new state — including a single remote employee
- Diarise a rate check annually for every state you operate in
- Reconcile PT deducted per payroll to PT remitted per state, monthly
