Professional Tax
Professional tax is a direct tax collected by state governments in India, including Karnataka. It applies to salaried employees and professionals—such as chartered accountants, lawyers, doctors, engineers, and others—as well as business owners and merchants. Each state sets its own rates and collection methods, and in Karnataka, the tax is deducted directly from salaries or fees for those engaged in various professions.
Professional Tax in Karnataka
In Karnataka, professional tax is collected by the state government as per the provisions of the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976. Salaried employees, self-employed professionals, businesses, and traders are liable to pay professional tax.
- Registration: Employers must obtain a Professional Tax Registration Certificate (PTRC) to deduct tax from employees. Self-employed individuals or business owners must obtain a Professional Tax Enrolment Certificate (PTEC) to pay the tax on their own behalf. Both registration and tax payments can be completed online through the Karnataka Commercial Taxes Department portal.
- Professional Tax Deduction in Karnataka: Employers are required to deduct the applicable professional tax from employees’ salaries each month and remit it to the government by the 20th of the following month, based on the Karnataka professional tax slab. Employers must also file monthly or annual returns, depending on the number of employees.
Self-employed individuals and business owners must pay the tax annually—generally ₹2,500 if the gross income exceeds the slab threshold—typically before April 30 each year.
Penalties apply for late payment, non-deduction, or failure to register, and may include interest, fines, or other legal consequences.
Karnataka Professional Tax Slab
The Karnataka professional tax slab is determined based on the monthly income of an individual. As per the professional tax rate in Karnataka, the following slab applies:
- Salary up to ₹14,999 – Nil
- Salary ₹15,000 and above – ₹200 per month (until January)
The maximum annual professional tax in Karnataka 2025-26 is capped at ₹2,500 per individual. This ensures that no salaried person or professional pays more than this annual ceiling, maintaining parity across the workforce.
The Revised Professional Tax
In the 16th Karnataka Budget for 2025-26, the government announced no new taxes but made a significant change in the professional tax system. For salary and wage earners, the professional tax for February has been raised from ₹200 to ₹300, aligning the monthly deduction with the annual maximum limit of ₹2,500.
Previously, the professional tax deduction was ₹200 per month, amounting to ₹2,400 annually. With the amendment, the deduction for February is increased to ₹300. However, since the annual cap remains at ₹2,500, this adjustment effectively collects an extra ₹100 overall, rather than increasing the monthly deduction for all 12 months.
Based on the latest available data, Karnataka stands out as India’s top destination for white-collar professionals, with an active workforce of approximately 59 lakh individuals. With the recent Professional Tax revision leading to an extra deduction of ₹100 per salaried employee, a rough estimate suggests that the state could potentially see an additional revenue of around ₹59 crores.
Adapting to the Change
- Payroll and HR Updates: Employers must update their payroll and HR systems to reflect the increased deduction for February and communicate these changes clearly to employees.
- Accounting and Compliance: Businesses need to adjust their accounting processes to ensure the correct implementation of the increased deduction in February and timely remittance of the precise amount to the tax department.
The budget avoids new taxes and implements a limited professional tax increase, fostering a stable business environment and reinforcing confidence among businesses and workers. This targeted adjustment aligns tax policies with established limits while minimizing overall economic disruption.
