Your Professional Tax is likely to triple from Rs 2,500 a year to Rs 7,500 from the next financial year.
With a view to increasing the revenues of state governments and local bodies, the central government has decided to raise the ceiling on professional tax.
Since a Constitutional amendment is required to enable any increase in professional tax, the government has drafted a Bill for the 109th amendment of the Constitution. The Bill will be introduced in the next session of Parliament that commences on October 17.
Professional tax is levied by state governments or local municipal bodies and is in addition to the income tax that the central government collects from you.
Earlier too a similar Bill for the 94th amendment of the Constitution, readied by the Union ministry of finance in 2001, aimed at amending Clause 2 of Article 276 to increase the professional tax ceiling was moved. But the then Cabinet deferred decision on it January 2002 to examine an alternate scheme.
When no decision to increase professional tax was taken, a proposal was mooted to amend Article 276 to empower Parliament to fix or raise ceiling of the professional tax through a parliamentary law instead of requiring amendment in the Constitution to raise the limit. However, the Union law ministry rejected the proposal saying that the scheme of the Constitution does not permit such leeway.
Article 276 of the Constitution empowers the state to levy the tax in respect of profession, trade, calling and employment, but it also fixes the ceiling that can be amended only through the Constitutional amendment by Parliament.
Currently, 24 Indian states collect revenue through this source and most of them have already imposed the maximum permissible levy of Rs 2,500 a year. Uttar Pradesh, Uttaranchal, Jharkhand and Arunachal Pradesh are the only exceptions and have not levied professional tax.
Goa, Haryana, Himachal Pradesh, Kerala, Rajasthan, Bihar, Punjab and Tamil Nadu have empowered their municipal bodies to collect professional tax while Jammu & Kashmir, Maharashtra, Madhya Pradesh and Andhra Pradesh impose this tax themselves.
State assemblies have enacted either the state law or the local body law to enable imposition of this tax. Once Parliament adopts the amendment in the Constitution to raise the ceiling to Rs 7,500 a year, state assemblies will amend their own laws to clamp the tax.
The original ceiling on the professional tax, as prescribed in the Constitution passed by the Constituent Assembly, was Rs 250 a year. It was raised to Rs 2,500 a year in 1988 and since then both the 11th and 12th Finance Commission have called for its upward revision.