What is the difference between Professional Tax and Income Tax?

Difference between Professional Tax and Income Tax: A complete guide

Income tax is not the same as professional tax. While a professional tax is governed by the state government, the income tax is controlled by the federal government (Central Government). Professional tax is not expected to be paid by Union Territories, on the other hand Income Tax is mandatory for every entity who is earning in a country. A taxpayer must first understand “What is Income Tax and advantages of filing Income Tax ?” and “What is Professional Tax and advantages of Professional Tax Filing?” in order to understand the differences between Professional Tax and Income Tax. So let’s quickly review these two concepts.


What is Income Tax?

The Income Tax is a charge levied by the central government on individuals and enterprises in accordance with certain rules and regulations. For every taxpayer it is mandatory to submit an ITR (Income Tax Return) each fiscal year in order to assess their various tax liabilities. The government derives a sizeable portion of its revenue through income tax. Then, these taxes are used to fund a variety of public needs, including food, transportation, and communication.

Advantages of filing Income Tax

  • Income Tax Return is of substantial legal significance. It is noted with the authorities. It serves as legal proof in two ways: as evidence of income and as evidence of identity.
  • When a person needs to apply for a vehicle loan, a house loan, etc., filing the ITR will aid them. A copy of tax returns maybe requested as evidence of income statement by all major banks. Therefore it is beneficial to file ITR on time for easy approval of a bank loan.
  • When applying for a visa, the majority of embassies and consulates demand that you submit copies of your tax returns for the previous two years. These are among the legally required documents, so it is always advantageous to timely file your ITR.

What is Professional Tax?

Professional Tax is not a tax imposed just on professionals, as the word implies. Any person who earns a living through a profession, employment, trade, or any other way through which they earn an income is subject to this tax. The right to impose and collect Professional Tax is granted to the State Government under the provisions of Clause (2) of Article 276 of the Indian Constitution. No state, however, can impose a Professional Tax on any taxpayer over 2,500 INR. According to the Income Tax Act of 1961, Professional Tax payments can be deducted from taxable income.

Advantages of Professional Tax filing

  • According to the law, it is mandatory to pay Professional tax. As a result, timely payment of Professional tax can help employers and self-employed individuals avoid penalties and legal action.
  • If an entity pays professional tax in a timely manner, then The employer or self-employed individual may claim a deduction for previously paid professional tax.

What is the difference between Professional Tax and Income Tax?

Professional Tax

Income Tax

Professional Tax is governed by the State Government.

Income Tax is governed by the Central government.

Article 276 of India’s constitution governs professional taxes.

Entry number 82 of the Union list of the Indian Constitution designates the income tax as a constitutional requirement.

No state, however, can impose a Professional Tax on any taxpayer over 2,500 INR, as per the Income Tax Act.

For individuals, HUFs under 60 years of age, and NRIs, the maximum amount of income tax exemption is INR 2,50,000.

The annual professional tax of an individual is divided into 12 instalments to pay this tax. Every month, these instalments are paid.

The due date for filing ITR for an Individuals and HUFs, whose accounts need not to be audited is 31st July.

Only people who engaged in Professional services or some sort of business that are eligible for professional tax advice.

Every person is required to pay income tax, regardless of whether they are providing services or not; if the maximum limit for exemption is more than their income, they need to pay tax.


The basic difference between professional tax and income tax is that one is governed by state government and the other one is governed by central government. One must pay all taxes on time and keep accurate records in order to be a good Indian citizen. This will not only make the government run more smoothly, but it will also help you become a more responsible member of society. To be more professional while paying various taxes, one needs additionally file an ITR.

Zarana Mehta: Zarana Mehta is an MBA in Finance from Gujarat Technology University. Though having a masters degree in Business Administration, her upbeat and optimistic approach for changes led her to pursue her passion i.e. Creative writing. She is currently working as Content Writer at Ebizfiling.
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