Professional tax may rise by Rs 5,000

[suguhopes]

NEW DELHI: Doctors, lawyers and other professionals —both salaried and
self-employed— may now have to pay a higher professional tax.

Acceding a long-pending demand of the state governments, the Centre
has decided to raise the ceiling on professional tax from Rs 2,500 to
Rs 7,500 per annum. The Union Cabinet is expected to take up the
proposal on Thursday.

Professional tax is levied by state governments or local bodies on
professions, trades, callings and employment. The power to levy the
tax flows from Article 276 of the Constitution that also caps the tax
amount. The Centre will amend Article 276 to raise the limit. Although
Delhi does not impose the tax, states such as Karnataka, Maharashtra,
West Bengal, Andhra Pradesh, Tamil Nadu and Gujarat do so.

The limit was fixed in 1998 at Rs 2,500 per annum. Increase in tax has
been a long-pending demand of the states, pointing at rise in income
levels in the past few years.

The Centre’s reluctance to state governments’ demand for a hike in the
limit is borne out of the fact that taxpayers who pay professional tax
are eligible for a deduction under the Income-Tax Act. So, while the
state governments’ revenues grow, the Centre loses tax on this count.

However, with the direct tax collections witnessing stupendous growth,
state governments had intensified pressure on the Centre. Their
argument is that the tax does not have a substantial impact on
Centre’s total kitty as the collection under this head by states was
only Rs 3,500 crore.

Some state governments wanted the limit to be increased to Rs 10,000
per annum, but the Centre has agreed to raise it to Rs 7,500.

N.Sukumar
Research Analyst