Profession Tax Computation Flow

The frequency with which you must deduct profession tax varies among states. The deduction frequencies for each state (monthly, quarterly, semiannually, or annually) are stored in variables, one variable for each state.

Rates and slabs that are applicable to each state are stored in brackets, one bracket for each state.

Each employee is linked to an establishment and the establishment is linked to a state. The rates that are applicable to each state are stored in a bracket.

Profession tax differs from state to state, and the deduction occurs based on the specified frequency. The amount deducted for profession taxes is considered for the calculation of the standard deduction as discussed in step 4 of the Income Tax process flow.

Note:

Make sure that a payee's profession tax establishment is set up using the Establishment component (ESTABLISHMENT_DATA) in PeopleSoft HR because this information is vital to the proper calculation of a payee's profession tax deduction. This is the only source where an employee is linked to an establishment and an establishment to the state, therefore determining the correct deduction.