Now Reading: Professional tax deduction explained, can you claim it in ITR
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Professional tax deduction explained, can you claim it in ITR
Professional tax is a state-level direct tax deducted from the salary of eligible employees by employers, or paid directly by self-employed individuals. Under Article 276 of the Constitution, the maximum amount per…
Professional tax is a state-level direct tax deducted from the salary of eligible employees by employers, or paid directly by self-employed individuals. Under Article 276 of the Constitution, the maximum amount per year is Rs 2,500. It is levied by states including Maharashtra, Karnataka, Tamil Nadu, Gujarat, Kerala, and West Bengal, but not by Delhi, Uttar Pradesh, Rajasthan, Punjab, Haryana, or Uttarakhand.
The tax can be claimed as a deduction from taxable salary under Section 16(iii) of the Income Tax Act, but only if you file under the old tax regime. The deduction is not available under the new tax regime. If the employer pays the tax without deducting it from salary, it is first added to income as a perquisite, then allowed as a deduction. Professional tax is not part of your CTC, it reduces monthly take-home pay.
Indian Opinion Analysis
The old versus new tax regime choice is the key practical question for salaried employees. Under the new regime, which has lower rates but fewer exemptions, Section 16(iii) deductions are not allowed. For someone earning Rs 50,000 monthly in a state that levies the maximum Rs 2,500 annually, the tax saved under the old regime is exactly that amount. The Finance Act 2023 made the new regime the default, but employees can opt for the old regime each year. The next deadline to switch for FY 2025-26 is filing your return by July 31, 2026. The real cost of not knowing: losing Rs 2,500 in deduction each year.
Source: livemint.com
This story was synthesised by AI from the source linked above.
