Tax & Compliance·5 min read
Understanding Professional Tax (PT) Obligations
Deduct and deposit professional tax correctly in Kerala and other states—or face employee disputes and employer penalties that scale with headcount.
January 03, 2024
What you'll take away
- PT applies to salaried employees and practising professionals in many states—not 'only for doctors'.
- Employer registers PTRC, deducts monthly, files returns; company pays PTEC for its existence.
- Kerala slabs differ from Karnataka/Maharashtra—use state-specific rules.
- Pelago sets up PTRC/PTEC and syncs with payroll before first salary run.
What professional tax really is
State-level tax on income from employment and professions. Article 276 of the Constitution caps how states charge—it is not a central GST-style tax.
Despite the name, it hits regular employees, not only doctors and lawyers. Founders paying themselves salary must deduct PT where applicable.
Employer obligations
- Obtain PTRC (Professional Tax Registration Certificate) before employment starts.
- Deduct PT from salary each month per state slab (often ₹100–₹2,500 annually spread monthly).
- Deposit to state treasury and file periodic returns.
- Pay PTEC (employer enrolment) annually for the entity itself in many states.
Founder tip: In Kerala, verify latest slab notifications—slabs changed historically and payroll software defaults may be wrong.
Hiring your first employee?
Professional tax + PF/ESI registration aligned to your state.
Book payroll setup callKerala vs other states (snapshot)
Remote teams: PT usually follows where employee works, not where startup is incorporated.
| State | Notes for startups |
|---|---|
| Kerala | Slab-based deduction; registration on state portal |
| Karnataka | Slab up to ₹2,500 per year for higher salaries |
| Maharashtra | ₹2,500 for many salaried employees (gender rules varied—check current) |
| Telangana/AP | PT applies with local forms |
Penalties and audits
Late registration and non-deduction trigger interest and penalties; employees may question payslips during funding due diligence.
Align PT with PF/ESI registration—Pelago bundles labour registrations for first hires.
Exemptions and special cases
Some categories (parents of disabled, certain disabilities) may claim exemptions—document proofs. Directors' remuneration may have different treatment—confirm with state rules and CA.