Earning Components on which Professions Tax is NOT applicable

In India, Professions Tax (PT) is a state-level tax levied on the income earned by salaried employees, professionals, and traders. While it's primarily applicable on gross salary or wages, certain earning components are excluded from PT calculation.

✅ Earning Components on which Professions Tax is NOT applicable:

1. Reimbursements:

   • Conveyance/transport reimbursement

   • Medical reimbursement

   • Travel reimbursement

   • Mobile bill reimbursement

   • Uniform allowance (if paid as actuals)
     (Reimbursement must be against actual bills and not paid as a fixed allowance)

2. Statutory Contributions by Employer:

   • Employer’s contribution to Provident Fund (PF)

   • Employer’s contribution to ESI

   • Gratuity paid by employer

   • Leave encashment at the time of retirement

3. Exempt Allowances:

   • House Rent Allowance (HRA) (exempt portion as per Income Tax rules)

   • Conveyance allowance up to ₹1,600 per month

   • Allowances to meet cost of travel on duty (if not in the nature of fixed pay)

4. One-time Payments (on Retirement/Death):

   • Gratuity

   • Encashment of leave at retirement

   • Compensation on retrenchment

   • Commutation of pension

   • Death-cum-retirement gratuity

5. Others:

   • Dividend income

   • Interest income

   • Share of profit from partnership firm

   • Agriculture income (not salaried)

   • Gifts not related to employment

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🛑 Important Notes:

• Professional Tax is calculated on "gross salary or wage", but different states define this differently.

• Some states may include certain allowances in the PT calculation if they are fixed components (e.g., transport or medical allowance if not reimbursed but paid as fixed).

• States like Maharashtra, Karnataka, Tamil Nadu, West Bengal, etc., have different slabs and definitions, so PT applicability may vary.

Refer - Salary definition in the Act. 

Circular no 1076/Cir. 29/76 dated 5 June 1985