Professional tax has often been confused with TDS. But the two are totally different from one another in numerous ways. But before getting into the comparison, it is important to under their definition as most of the differences are hidden in the definition itself. So without further ado, let us begin.

What is Professional Tax?

Professional tax is a form of income tax that you pay to the state for the services and infrastructure it provides you. As the professional tax is regulated by the Indian states, they vary from one state to another. Moreover, not every Indian state follows the system of professional tax. Only in a handful of them, professional tax is applicable. 

Professional tax is paid on the basis of the professional tax slab each state has formulated. Therefore, the professional tax slab of each state will also vary from another. 

What is TDS?

Tax Deducted at Source or TDS is a tax deduction if the income of a person is above the tax limit threshold. Just like a professional tax slab, the rate of TDS is determined by the tax department. It is usually the employer whose duty it is to deduct TDS before making the final payment to the employee. The one who deducts this tax on behalf of the payee is called a deductor whereas the recipient of TDS deducted income is called a deductee. 

Differences Between Professional Tax and TDS

Now that the basic difference between professional tax and TDS has been established, it is time to understand their differences.


  1. Professional tax is paid by almost all the individuals provided their income is above the professional tax slab. TDS is deducted at the source. Before you receive your final income, TDS will be deducted with the presumption that your income is above the margin of tax exemption. 
  2. Professional tax is limited to a handful of states. You do not have to pay this tax in many states. But for TDS, no such thing holds. You have to pay TDS if your income surpasses the limit from which taxation is applicable. It stands in all the states of the country. 
  3. Exemption limits for professional tax vary from state to state. In Andhra Pradesh earning less than Rs 15,000 does not make you liable for professional tax. The exemption limit on TDS, on the other hand, is Rs 2,50,000. 
  4. Professional tax is deducted on the basis of your monthly income. Although you can claim a deduction for it in case your income falls below the professional tax slab. Know more on how to claim a deduction against professional tax. For TDS, the same can be said but with the added advantages that you can claim for it while filing your income tax returns. 
  5. The maximum payment for a professional tax is Rs 2,500. Where for TDS, no such amount is fixed.
  6. Professional tax is not an advance you pay as taxes but a state tax itself. TDS, however, can be considered an advance on your tax paid by the deductor in advance on your behalf. You can claim a deduction for TDS while filing your income tax returns.


Despite major differences, there are also many similarities between professional tax and TDS. They are as follows:

  • Both these taxes can be shown in the salary slip.
  • They are deducted by the employer. 
  • Both are a form of indirect tax
  • Both can be claimed as deduction 
  • Both are periodic rather than annual. 


Hence, it is important to know in detail about professional tax and TDS before you can distinguish one from another. There are many differences as well as similarities among them. It is only by comparing both of them can you figure out the differences they have in their essence and functionality.