Central government employees are eagerly waiting for the implementation of the 8th Pay Commission. The Pay Commission is currently in ‘action mode’ in this matter; Meetings are being held with employee organizations in different states so that their suggestions can be taken and their demands can be carefully considered. Meanwhile, the staff side of the National Council-Joint Consultative Machinery (NC-JCM) has proposed that central government employees be completely exempted from professional taxes imposed by states.
**What is professional tax?**
Under Article 276 of the Constitution of India, all state governments have the power to levy and collect professional taxes. It is deducted based on different tax slabs in the state; However, its maximum limit is ₹2,500 per year. Central employees opting for the ‘old tax regime’ are entitled to deduction under Section 16(3) of the Income Tax Act on professional tax deducted from their salary, whereas no such exemption is available under the ‘new tax regime’.
**What are the demands of employee organizations?**
Employee representatives argue that central government employees already pay a lot of taxes to the central government. They also pay GST (Goods and Services Tax) on the use of daily necessities. In view of this, professional tax deducted from their salaries by the state governments is an additional economic burden on them. In a memorandum submitted to the Commission, the staff side of the NC-JCM has requested that the 8th Pay Commission should include in its final report the recommendation that all central employees be exempted from professional tax.
**Why do state governments impose professional tax?**
State governments impose professional taxes to raise revenue because they have limited means of imposing taxes. A large part of the direct tax revenue goes to the central government. As a result, states levy professional taxes to ensure the smooth functioning of healthcare, education and government welfare schemes. The funds collected from this are transferred to the Municipal Corporation or local bodies, which use this money for cleanliness, water supply, repair of roads, installation of streetlights and development of parks and other such facilities in the city.
