Professional Tax in MP (Madhya Pradesh): Everything Explained

When you closely observe your salary slip, you can notice basic salary breakups, allowances such as HRA and a small deduction. This deduction is mandatory for all employees across all states (except some States and UTs). It is known as a professional tax deduction. The deduction amount and some rules vary from one State to another.

Professional tax is a tax that the State Government of Madhya Pradesh levies on individuals who earn income through any medium. It means individuals, whether they are a professional, traders, or employers, must pay professional tax in Madhya Pradesh according to the income threshold set by the State Government.

Madhya Pradesh Professional Tax Act, 1995 (can also be referred to as Madhya Pradesh Vritti Kar Adhiniyam, 1995) is responsible for managing professional tax in MP, and it extends to the whole State of Madhya Pradesh.

The State Government of Madhya Pradesh is responsible for collecting P Tax within the State.

According to Article 276 of the Indian Constitution, professional tax is levied on professions, trades, callings and employment. Therefore, individuals of Madhya Pradesh involved in any profession, calling or trade, or employment must pay professional tax within the State. To be precise, persons responsible for paying professional tax can be broadly classified into two segments. They are,

• Salaried individual
• Self-employed individual

As stated earlier, individuals earning salary or wages are liable to pay professional tax in MP. Here, the employers are responsible for deducting professional tax from the salary or wages of respective employees and depositing (by the treasury challan) to the State Government on behalf of them.

Note: If employers have paid salary or wages to individuals, they have to deposit the professional tax whether the deductions have been made or not.

On the other hand, self-employed individuals of Madhya Pradesh must pay professional tax themselves and submit it to the local authorities designated for the collection of the same.

Employers after deducting professional tax from employees must submit the same within 10 days of the end of the month against which the deduction has been made.

Alternatively, persons other than employees must pay P tax in Madhya Pradesh every year. The dates vary depending on the registration of professional tax in MP. The dates are as follows,

• If a person registers before the start of a financial year or registers on or before 31st August of a financial year, he/she has to pay P tax in MP before 30th September of that financial year.
• If a person registers his/her business after 31st August of a financial year, he/she has to pay P tax in MP within 30 days of registration.

If employers (on behalf of employees) or self-employed individuals fail to pay P tax with the stipulated date, they have to pay the penalty equal to 2% per month of the total due amount. The penalty amount can rise as high as two-thirds of the total tax due.

The State of Madhya Pradesh frees certain individuals from paying professional tax with the State. They are as follows,

• Parents or guardians of handicapped/mentally retarded children
• Individuals having a disability of 40% or more of permanent disability or blindness

As working or earning individuals know about slab rates and due dates of payment of professional tax in MP, they can calculate the amount and pay the same within the stipulated date.