Understanding Professional Tax: Does a Resigned Employee's Bonus Affect Tax Slabs?

Dear Sir, I have a query regarding the Professional Tax (W.B) deduction for a resigned employee. The issue is that one of our employees resigned from our organization in June 2024, and we have to clear her full and final settlement with her due bonus amount.

Query on Professional Tax Deduction

My query is: Will the bonus amount be added to her gross salary for the Professional Tax deduction, and will the slab of Professional Tax amount be increased for that?

Kindly help.

Regards,
Tarak Shaw

Professional tax and bonuses

Profession tax is a tax on a profession; thus, income from all sources, including bonuses, will qualify for it. After all, a bonus is a receipt in the hands of an employee, and the employee should pay tax on that amount as well. Therefore, when preparing a full and final statement, if you include the bonus as a component of amounts payable, you should consider it part of revenue for the purpose of computing professional tax and income tax, if applicable.

I believe the same question was raised in the forum last week, and a number of comments also appeared regarding it. If this post is from the same thread starter, please do not repost the same question but instead use the existing thread to seek further clarifications, if needed.

Whether the bonus is paid on a monthly basis, yearly basis, festival bonus, or statutory bonus as per the Payment of Bonus Act, professional tax will be applicable as explained by Mr. Madhu TK.

Regards,
S K Bandyopadhyay (WB, Howrah)
CEO USD HR Solutions
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Bonus Payment and Professional Tax Implications

If you pay a bonus during Durga Puja, the amount of the bonus will become part of the income for that half-year. For example, if Durga Puja falls in October, then it will be considered as income for the computation of professional tax for the second half of 2024-25.

Handling Bonus for Resigned Employees

In the case of an employee who has left the service in the first half, if you are paying the bonus at the time of Full and Final settlement, you can include the bonus amount in the first half's income and deduct the tax accordingly from the Full and Final settlement. If the bonus is not paid now but will be paid in October (during Durga Puja), then when you pay the bonus, you can deduct the professional tax from the bonus.

Dear Tarak,

The Professional Tax (W.B) is not applicable to "Annual Bonus" in West Bengal. Therefore, you need to calculate PT on the exact salary components.

Salary and Wages

Any person earning a salary or wages is liable to pay professional tax. Salary and wages under the West Bengal State Tax on Professions, Trades, Callings, and Employments Act, 1979, are described below.

Salary and wages include the following:

1. Pay, Dearness Allowance, and any other amount paid as an allowance. Remunerations are received in cash or any other kind regularly.
2. Honorarium, perquisites, and profit instead of salary.
3. Leave encashment amount.
4. Leave concessional pay and subsistence allowance.

Salary and wages do not include the following:

- Medical reimbursement
- Reimbursement of conveyance charges
- Traveling allowance
- Salary paid to an apprentice under the Apprentices Act, stipend paid to the trainee
- Statutory Bonus
- Gratuity
- Ex-gratia payment

Pension granted to an employee is not considered a salary. Therefore, pensioners are not liable to pay Professional Tax on their retirement.

Thank you for the above explanation. However, what I understand about salary is that it includes the salary as per the Income Tax Act. Obviously, that will include a bonus as well. Section 2(j) of the Act (West Bengal State Tax on Professions, Trades, Callings, and Employments Act, 1979) also clarifies this. Since a bonus is a receipt of income in the hands of employees, there is no scope for its exclusion, I believe.