Professional tax computing on OT/ Attendance Award

Dear Sir,

Greetings…!

You are requested to advise on deduction of Professional tax from the salary. Do we need to consider Attendance award, Overtime, Hardship allowance or any other allowances like does not consider regular basis whether payable in cash or kind in salary while computing Professional Tax?

Regards,
Milan Patel

Actually profession tax is not merely a tax on salary but it is the revenue received or generated by working with an employer, doing a profession or doing a business that is subjected to tax. As such you have to include your all allowances to decide profession tax. In the case of a profession, say a lawyer, the fees that he collects from his clients is the revenue taxable. For a businessman it is his turnover which is the base for deciding the profession tax. For an employee, the salary which he received during a period, say six months, is the amount on which tax is decided. That salary should include all allowances including overtime allowances, hill allowances, hardship allowance, bonus and exgratia that he gets. At the same time, any reimbursement, like reimbursement of mobile phone bills, travel reimbursements etc shall be excluded. Hardship allowance is an allowance which is paid considering the hardship involved in the work. It is part of salary for income tax purpose also. Therefore, it cannot be excluded from salary for calculation of profession tax.