Professional Tax

Professional tax is one of the few taxes Indian state governments can levy directly on income, authorized under Article 276 of the Constitution, which otherwise reserves income taxation to the central government. Employers deduct it from employee salaries on the state's behalf and remit it under that state's own professional tax act - there is no single central law.

The Constitution caps total professional tax payable by any individual at 2,500 rupees per year, a ceiling raised from the original 250 rupees by the Sixtieth Amendment Act, 1988 and unchanged since. Within that cap, each state sets its own slab structure and payment schedule, usually monthly deduction, sometimes an annual lump sum, so the amount withheld from an employee in one state differs from another even at the same salary.

Not every state levies professional tax - Delhi, Haryana, and a handful of others do not - so whether it applies at all depends on the employee's work location, not the employer's registered office. For US companies running India payroll through an EOR or their own entity, professional tax is a small line item, but one that has to be configured per state rather than treated as a single national rate.