Professional Tax: Deduction from Salary | Salary Income
Deduction from salary: Professional Tax and
Entertainment tax
1)
Entertainment Allowance – Section 16 (ii)
2)
Professional Tax - Section
16 (iii)
Professional Tax on Employment:
Professional Tax also renowned as
Tax on Employment is paid to the state government. It is deducted by the
employer from the salary payable to the employee and such tax is paid to the
state government on behalf of the employee. Professional Tax is levied by the
state government under the right given in article 276 of the Constitution. As
it is a part of salary and paid to the State Government, it is allowed as a
deduction while calculating the taxable amount under the head “Income from
Salaries”. Thus Professional tax on employment is allowed as a deduction under
section 16 (iii) of the Income Tax Act, in the following manner:
Section 16 (iii)
16 The income chargeable
under the head “Salaries” shall be computed after making the following
deductions;
(iii)
a deduction of any sum paid by the assessee on account of a tax on
employment within the meaning of clause (2) of article 276 of the Constitution,
leviable by or under any law.
Certain
Points to be kept in mind:
-
Professional tax is allowed as a deduction to all the employees.
-
It is allowed as a deduction when actually paid.
-
When the professional tax deduction is to be availed, taxable
salary is to be calculated in the following manner:
Less: Professional Tax paid to the state government on behalf of the employee (XXX)
Other
Deductions (XXX)
Taxable
Salary XXX
-
In case where the professional tax is reimbursed or paid by the
employer, taxable salary is to be calculated in the following manner:
Less: Professional Tax paid to the state
government on behalf of the employee (XXX)
Other
Deductions (XXX)Taxable Salary XXX
In Gujarat
the Professional Tax is levied on salaries / wages. The slab rate to calculate
such rate as stated by Gujarat Panchayats, Municipalities, Municipal
Corporations and State Tax on Professions, Traders Callings and Employment Act
1976; as governing authorities is as under:
Monthly
Salary Slab
|
Amount
Payable as Professional Tax
|
< Rs. 6000 i.e. upto Rs. 5999
|
Nil
|
Rs. 6000 to Rs. 8999
|
Rs. 80 / Month
|
Rs. 9000 to Rs. 11999
|
Rs. 150 / Month
|
Rs. 12000 and more
|
Rs. 200 / Month
|
Let us understand the above concept with the help of an example:
Example:
Details of Mr. X for the Financial Year 2012-13:
Salary Rs.
1,80,000 p.a.
Professional Tax paid Rs. 2,400
Calculate Taxable Salary assuming there is no other adjustments.
Solution:
Salary
Rs. 1,80,000
Less: Deduction u/s 16
(iii) ( Rs. 2,400)
-
Professional Tax Paid .
Taxable
Salary Rs.
1,77,600
==========================================================
Extension of Example:
Rs. 1500 reimbursed by the employer for Professional Tax.
Now Calculate Taxable Salary assuming there is no other
adjustments.
Solution:
Salary (Note
1)
Rs. 1,81,500
Less: Deduction u/s 16
(iii) ( Rs. 2,400)
-
Professional Tax Paid .
Taxable
Salary Rs.
1,79,100
Note 1:
When the professional Tax is reimbursed by the employer in whole
or in part such amount is added the salary before availing deduction under
section 16 (iii). Therefore:
Salary = Actual Salary +
Reimbursement of Professional Tax by Employer
= Rs. 1,80,000 + Rs. 1,500
= Rs. 1,81,500
0 comments:
Post a Comment