Karnataka Enhances Professional Tax Obligations for Higher-Income Employees via Statutory Amendment

Effective from April 1, 2025, the Government of Karnataka has implemented The Karnataka Tax on Profession, Trades, Callings and Employments (Amendment) Bill, 2025.Pursuant to the fiscal declarations set forth in Paragraph 476 of the Budget Speech for the financial year 2025–26, the Government of Karnataka has enacted an amendment to the Karnataka Tax on Profession, Trades, Callings and Employments Act, 1976. The legislative measure aims to incrementally augment the professional tax burden on a defined class of salaried individuals, thereby reinforcing the State’s own revenue generation capabilities in a manner that maintains proportionality and economic efficiency.

The amendment applies specifically to salaried or wage-earning individuals drawing gross monthly remuneration of INR 25,000 or more, and modifies the quantum of professional tax payable under the extant statute as follows:

• Monthly Tax Liability:
  • INR 200 per month from April to January and March
  • INR 300 for February
• Total Annual Liability: INR 2,500
  (as compared to the erstwhile total of INR 2,400)

As outlined in the Statement of Objects and Reasons appended to the Bill, the proposed revision is calibrated to align statutory tax obligations with the broader objectives of the State’s fiscal policy. The enhanced levy is modest in quantum and is intended to impose minimal financial strain on the affected taxpayer cohort. Importantly, the State has clarified that the implementation of the revised tax schedule will not entail any incremental administrative expenditure for the Government.

The amendment thus reflects a fine balance between augmenting the State’s tax base and preserving taxpayer equity, particularly in the salaried segment, where statutory deductions are often borne directly by the employer on behalf of the employee. From a compliance perspective, employers registered and operating within the State of Karnataka must take cognizance of the following statutory obligations arising under the amended framework:

1. Mandatory Payroll Integration: Employers are required to incorporate the revised professional tax rates into their payroll systems with effect from April 1, 2025, ensuring that appropriate deductions are effected from all eligible employees.
2. Timely Remittance: The deducted amount must be remitted to the jurisdictional professional tax authorities in accordance with the statutory timelines prescribed under the Rules framed pursuant to the Act.
3. Administrative Adjustments: While the upward revision of INR 100 annually per employee may appear marginal in isolation, large-scale employers may experience a compounded impact in terms of reconciliation, accounting adjustments, and employee communication protocols.

Failure to appropriately modify payroll deductions in accordance with the revised statutory schedule may expose employers to penalties under the enforcement provisions of the Act, including interest on delayed remittance and possible prosecution in cases of wilful non-compliance.

The Karnataka Tax on Profession (Amendment) Bill, 2025 is emblematic of the State Government’s continuing effort to refine its indirect taxation framework in a manner that upholds the principles of fiscal equity and administrative simplicity. Employers are advised to commence preparatory steps immediately to ensure seamless compliance by the time the revised provisions come into force.