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Professional tax ceiling may double to Rs 5,000 a year
December, 19th 2007
Professionals, both salaried and self employed, as well as traders should be prepared to pay more tax. The Centre is considering amending the Constitution to raise the ceiling on professional tax from Rs 2,500 per annum at present to Rs 5,000.

The tax on professions, trades, callings and employments, is collected by state governments or local bodies. This right is granted to them by the Constitution. State governments collect about Rs 3,000 crore through this tax.

The Centre is considering an amendment to Article 276 of the Constitution to raise the limit following a long-standing demand by the state governments, an official said. Though, some states have demanded raising the ceiling to Rs 10,000 per annum, the Centre is in favour of just doubling it. A final decision will be taken shortly, the official said.

Taxpayers are eligible to claim a deduction under income-tax against payment of this tax. With the income-tax collections growing by over 40%, state governments have been putting pressure on the Centre to enhance the limit. However, a hike in the ceiling may not have much of an impact on the Centres total income-tax collection.

Eight state governments including Karnataka, Maharashtra, West Bengal Andhra Pradesh, Tamil Nadu and Gujarat collect the tax on their own, while in several others do so through panchayats and local bodies.

The central government had amended the Constitution in 1998 to revise the limit to Rs 2500 per annum. However, many states have demanded a further revision following changes in the economic situation and rise in income levels in past nine years.

States are under pressure to meet increased expenditure on account of infrastructure, education and healthcare. A hike in the limit is expected to not just shore up revenues of state governments, but help them meet their financial requirements.
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