What is professional tax and who has to pay it?

By the India Law Simplified editorial team · Verified against the bare Acts & official portals · Updated 2026-08-18 · ~8 min read

⚡ Quick answer

Professional tax is a small tax levied by some state governments on salaried employees, professionals and businesses for the privilege of earning a living in that state. It's not levied everywhere — states like Maharashtra, Karnataka, West Bengal and Tamil Nadu charge it, while Delhi, Haryana and UP don't. For salaried people, the employer deducts it from salary and deposits it. The amount is slab-based on income and capped by the Constitution at ₹2,500 per year, and it's deductible from your taxable salary under Section 16(iii).

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If you've ever spotted a small 'PT' or 'professional tax' deduction on your payslip and wondered what it is, this guide is for you. Professional tax is a state-level levy — small in amount, but a real compliance item for employers and professionals. Here's what it is, who pays it, how much it can be, and why it appears in some states but not others, in plain language.

1What it is and who levies it

Despite the name, professional tax isn't only for 'professionals' — it's a tax on income from employment, profession, trade or calling, levied by state governments (and some local bodies). It's separate from income tax, which is central.

Because it's a state subject, it exists only where the state has enacted it. States like Maharashtra, Karnataka, West Bengal, Tamil Nadu, Gujarat and Telangana levy it; Delhi, Haryana, Uttar Pradesh, Rajasthan and a few others don't.

2Who pays it and how much

Different earners pay it differently:

Salaried employees: the employer deducts it from salary each month and pays it to the state
Self-employed professionals and businesses: they pay it directly to the state
The amount is slab-based on monthly income — higher income, slightly higher PT, up to the cap

⚠️ ImportantThe Constitution caps professional tax at ₹2,500 per person per year — so however high your income, your annual professional tax can't exceed ₹2,500. It's a small amount, but non-compliance attracts penalties for employers.

3PTRC and PTEC — the two registrations

Employers and businesses in states that levy professional tax usually need two registrations:

PTRC (Professional Tax Registration Certificate): to deduct PT from employees' salaries and deposit it
PTEC (Professional Tax Enrolment Certificate): to pay the employer's/business's own professional tax liability

💡 ExampleA company with employees in Maharashtra obtains a PTEC to pay its own professional tax and a PTRC to deduct and deposit PT from its staff's salaries each month. A freelance consultant in Karnataka, with no employees, only needs to enrol and pay her own professional tax directly to the state.

4The income-tax angle

There's a small silver lining: the professional tax you pay is deductible from your salary income under Section 16(iii) when computing your taxable salary (in the old regime). So that ₹2,500 a year isn't taxed again as income.

5It is not deductible if you are on the new regime

The deduction for professional tax is one of the things the new regime takes away, and it is missed because the amount is small enough not to be checked.

Section 16(iii) allows a salaried person to deduct professional tax actually paid from salary income. Under the new regime, that deduction is not available — only the standard deduction, and the deduction for family pension, survive from section 16.

The tax is still deducted from your salary either way. Under the new regime you simply do not get relief for it, so it is a real cost rather than a timing difference.

⚠️ ImportantFor a professional or a business paying it directly rather than through salary, professional tax remains an allowable business expense, because it is deducted under the business head rather than section 16.

6PTRC and PTEC — two registrations, two calendars

An employer in a state that levies professional tax usually needs both registrations, and they do different things.

The PTRC — the registration certificate — is what lets an employer deduct professional tax from employees' salaries and deposit it. The PTEC — the enrolment certificate — covers the entity's or the professional's own liability, which exists independently of whether anyone is employed.

The filing frequency under a PTRC depends on the previous year's deductions, monthly above a state-set figure and annually below it. PTEC liability is usually a single annual payment. Interest and penalty run on late payment, and the amounts are small enough that arrears accumulate unnoticed for years.

7Where it applies, and where it does not

Professional tax is levied by states, so whether you pay it at all depends on where you work rather than on what you earn.

Maharashtra, Karnataka, West Bengal, Tamil Nadu, Andhra Pradesh, Telangana, Gujarat, Madhya Pradesh, Kerala, Odisha and Assam are among the states that levy it. Delhi, Haryana, Uttar Pradesh, Rajasthan and Punjab, among others, do not.

Article 276(2) of the Constitution caps the total at ₹2,500 per person per year, which is why the amounts are modest everywhere and why the slabs differ only in how they get there.

✅ TipLiability follows the place of employment, not your residence. Someone living in Delhi but employed at a Gurugram or Noida office is governed by that state's position, and a remote employee's liability follows the office they are attached to.

8Who is exempt

Every state that levies professional tax also exempts categories of people from it, and the exemptions are not uniform.

Commonly exempted are senior citizens above a stated age, persons with a defined degree of permanent physical disability or blindness, and parents or guardians of a child with a disability. Several states exempt members of the armed forces, and some exempt women employed in specified capacities.

The exemptions apply automatically only if payroll knows about them. Where the ground is disability or a dependent child, the employee normally has to produce a certificate, and the exemption dates from when it is produced rather than from when the entitlement arose.

✅ TipIf you fall into one of these categories, raise it with payroll in writing. The amounts are small enough per month that an unclaimed exemption typically runs for years before anyone notices.

Key takeaways

Professional tax is a small state-level tax on income from employment, profession or trade.
Only some states levy it (e.g. Maharashtra, Karnataka, WB, TN); Delhi, Haryana, UP don't.
For salaried people, the employer deducts and deposits it; professionals pay it directly.
It's slab-based and capped at ₹2,500 per person per year by the Constitution.
Employers need a PTRC (to deduct from staff) and a PTEC (for their own liability); PT is deductible under Section 16(iii).

Frequently asked questions

Is professional tax the same in every state?

No — it's a state tax, so rates and applicability vary, and some states (like Delhi, Haryana, UP) don't levy it at all. The annual maximum anywhere is ₹2,500.

What is the maximum professional tax?

₹2,500 per person per year — a constitutional cap. No state can charge more than this, regardless of how high your income is.

What is the difference between PTRC and PTEC?

PTRC (Registration Certificate) lets an employer deduct professional tax from employees' salaries and deposit it. PTEC (Enrolment Certificate) is for paying the business's or professional's own professional tax liability.

Do freelancers have to pay professional tax?

Yes, if they operate in a state that levies it — a self-employed professional enrols (PTEC) and pays their own professional tax directly to the state, up to the ₹2,500 annual cap.

Can I deduct professional tax under the new tax regime?

No. Section 16(iii) allows a salaried person to deduct professional tax paid, but that deduction is not available under the new regime — only the standard deduction and the family pension deduction survive from section 16. It is still deducted from your salary, so under the new regime it becomes a real cost.

I live in Delhi but work for a Bengaluru company. Do I pay it?

Liability follows the place of employment rather than where you live. If you are attached to a Karnataka office, Karnataka's professional tax applies even though Delhi levies none. For fully remote employees the position follows the office you are on the rolls of, which is worth confirming with payroll.

What if my employer never deducted professional tax?

The obligation to deduct and deposit is the employer's, and interest and penalty fall on the employer rather than on you. But arrears can be recovered, and because the amounts are small they often accumulate unnoticed for years before a state notice arrives covering several of them at once.

Can I be liable in more than one state?

Yes, if you genuinely carry on a profession or trade in more than one state — a professional with offices in two states may need enrolment in both. For a salaried person with a single employer it does not normally arise, because liability attaches to the one place of employment.

Is professional tax a tax on professionals only?

No, despite the name. It is levied on income from employment, profession, trade or calling, so salaried employees in the states that levy it pay it as well. It is also entirely separate from income tax — it is a state levy, capped by Article 276(2) at ₹2,500 per person per year.