Is Overtime Included in Gross Salary for Professional Tax Deductions? Seeking Clarity!

Can anybody please help me out to understand whether "Overtime" amount is covered under "Gross salary"?

For example, if person A's salary is Rs. 7200/- and he earned overtime amount of Rs. 600/-. Do I consider his gross salary as Rs. 7800/- for the deduction of Professional Tax of Rs. 175/-? Or do I consider his gross salary as Rs. 7200/- with no PT deduction?

Please advise.

Inclusion of Overtime in Salary Calculation

OT will have to be included to work out PT.

"(j) 'salary' or 'wage' includes pay or wage, dearness allowance, and all other remunerations received or receivable by any person, including any amount received by way of arrears of salary or bonus by whatever name called, whether payable in cash or kind. It also includes perquisites and profits in lieu of salary as defined in section 17 of the Income Tax Act, 1961.

Explanation: Where 'bonus' by whatever name called is received in part or in full, then such bonus shall be spread over twelve months of the year or to such number of months the bonus relates to for the purposes of computing 'Salary' or 'Wage' for those months. This is an extract from the Karnataka PT Act."

There is no Profession Tax Act at the national level. Therefore, you need to refer to the profession tax laws of the state in which you work. Check the definition in the act to determine whether overtime is considered a part of the definition of gross wages.

Understanding Overtime and Gross Salary

Normally, overtime is not considered part of the salary or wage, as it is not an allowance universally received by all employees. Only those who work overtime will receive it, and there are many Acts, both related to employment and tax, that define wages or salary differently for various purposes. Therefore, you need to look into the specific Act, as the learned members above stated, to understand whether overtime is treated as part of salary or income for the purpose of the said Act.

As Saswata mentioned, the Professional Tax Act is a State Act, and you need to refer to your State Act to determine whether to include overtime for Professional Tax deduction or not.

Regards, B. Saikumar

Yes, you need to deduct PT on the full amount, i.e., on Rs. 7800, as it is considered as part of the gross salary.

Salary includes pay or wages, dearness allowance, and all other remunerations received by any person on a regular basis, whether payable in cash or in kind. It includes perquisites and profit in lieu of salary as defined in Section 17 of the Income Tax Act, 1961, but does not include bonus in any form and account or gratuity. Overtime received is a part of the salary. Even food subsidy falls within the scope of salary.

Salary includes pay or wages, dearness allowance, and all other remunerations, including overtime wages, received by any person. However, it does not include any form of bonus and does not account for payment of Profession Tax/ESI.

Professional tax will be only on wages and salary earned. Overtime does not form part of wages.

Hi,

Please check the relevant Act in your state. You should go by the definition of salary under the Act. The definition will give you a clear idea.

Hi,

In my opinion, the overtime (OT) should be a part of the gross salary and will affect the Employee State Insurance (ESI). Keep track of overtime for Provident Fund (PF) and ESI inspections. If the inspectors insist on including average overtime in the salary, tell them very clearly no.