Should professional tax be deducted from stipend
This query is : Resolved
04 February 2019
Dear all,
I am an Article doing my Articleship under a CA in Mumbai. My Current Stipend is Rs.8,000/-pm hence my firm is deducting PT from my stipend as it exceeds the Limit of Rs. 7,000/-pm.
Please guide me whether he should deduct it or not.
If possible,in case of Caselaws, Kindly provide it of Maharashtra Jurisdiction, or otherwise Give the reference of the Act
Thank You!!!
I am an Article doing my Articleship under a CA in Mumbai. My Current Stipend is Rs.8,000/-pm hence my firm is deducting PT from my stipend as it exceeds the Limit of Rs. 7,000/-pm.
Please guide me whether he should deduct it or not.
If possible,in case of Caselaws, Kindly provide it of Maharashtra Jurisdiction, or otherwise Give the reference of the Act
Thank You!!!
04 February 2019
PT is applicable on monthly Slab of Income, if it exceeds above limit including stipend.
05 February 2019
But sir PT is deducted on Salary of Individual and as per sec 2(h) of Pt act "salary" or "wage" includes pay or wages, dearness allowance and all other remunerations received by any person on regular basis, whether payable in cash or kind, and also includes perquisites and profits in lieu of salary, as defined in section 17 of the Income-tax Act, 1961, but does not include bonus in any form, and on any account or gratuity;
and Income-Tax Appellate Tribunal, Jaipur Bench in Sudhir Kumar Sharma versus ITO (1983) 15 Taxman
100 (Mag.).
The Tribunal in this case had held that the stipend received by an articled clerk from a Chartered Accountant was exempt under Section 10(16). The reason given by the Bench was that the stipend was
paid to meet the cost of books, coaching fees, examination fees and so on.
and hence we are not earning Salary as per the above case
Hence PT should not be deducted , right?
and Income-Tax Appellate Tribunal, Jaipur Bench in Sudhir Kumar Sharma versus ITO (1983) 15 Taxman
100 (Mag.).
The Tribunal in this case had held that the stipend received by an articled clerk from a Chartered Accountant was exempt under Section 10(16). The reason given by the Bench was that the stipend was
paid to meet the cost of books, coaching fees, examination fees and so on.
and hence we are not earning Salary as per the above case
Hence PT should not be deducted , right?
25 July 2025
Great question about Professional Tax (PT) deduction from stipend during articleship! Here's a detailed explanation based on Maharashtra law and case law:
---
### 1. **Is stipend considered "salary" for Professional Tax?**
* **Section 2(h) of the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975** defines **"salary" or "wages"** as:
> "pay or wages, dearness allowance and all other remuneration received by any person on a regular basis, whether payable in cash or kind... but does not include bonus or gratuity."
* **Stipend paid to articled clerks** is generally **not treated as salary**, because it is meant to meet expenses like books, coaching, exam fees, and is given as a training allowance rather than remuneration for services.
---
### 2. **Relevant Case Law:**
* **Sudhir Kumar Sharma vs ITO (1983) 15 Taxman 100 (Mag.) (Income Tax Appellate Tribunal, Jaipur Bench)**:
The ITAT held that the stipend received by an articled clerk was **exempt under Income Tax Act Section 10(16)** because it was paid to meet educational and training expenses and was **not "salary"**.
* Although this is an Income Tax case, it strongly supports the view that **stipend is not a salary or wages**.
---
### 3. **Professional Tax Implications:**
* Since Professional Tax is levied on **salary or wages**, **stipend should not be considered as salary** for PT deduction.
* The firm **should not deduct Professional Tax** from your stipend.
* If deducted, it could be challenged by referring to the above case and the definition under Maharashtra PT Act.
---
### 4. **What you can do:**
* Request your employer/firm not to deduct PT on stipend citing the above points.
* If insisted, seek clarification from the local Professional Tax Office.
* Alternatively, consult a tax professional or legal expert for official opinion or representation.
---
### Summary:
| Point | Explanation |
| --------------------------- | ------------------------------------------------------------------ |
| Is stipend "salary" for PT? | No, stipend is not salary/wages. |
| Can PT be deducted? | No, not legally justified. |
| Reference | Maharashtra PT Act, Sec 2(h); ITAT case Sudhir Kumar Sharma (1983) |
---
If you want, I can help draft a formal letter or email for your firm referencing this case and law. Would that help?
---
### 1. **Is stipend considered "salary" for Professional Tax?**
* **Section 2(h) of the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975** defines **"salary" or "wages"** as:
> "pay or wages, dearness allowance and all other remuneration received by any person on a regular basis, whether payable in cash or kind... but does not include bonus or gratuity."
* **Stipend paid to articled clerks** is generally **not treated as salary**, because it is meant to meet expenses like books, coaching, exam fees, and is given as a training allowance rather than remuneration for services.
---
### 2. **Relevant Case Law:**
* **Sudhir Kumar Sharma vs ITO (1983) 15 Taxman 100 (Mag.) (Income Tax Appellate Tribunal, Jaipur Bench)**:
The ITAT held that the stipend received by an articled clerk was **exempt under Income Tax Act Section 10(16)** because it was paid to meet educational and training expenses and was **not "salary"**.
* Although this is an Income Tax case, it strongly supports the view that **stipend is not a salary or wages**.
---
### 3. **Professional Tax Implications:**
* Since Professional Tax is levied on **salary or wages**, **stipend should not be considered as salary** for PT deduction.
* The firm **should not deduct Professional Tax** from your stipend.
* If deducted, it could be challenged by referring to the above case and the definition under Maharashtra PT Act.
---
### 4. **What you can do:**
* Request your employer/firm not to deduct PT on stipend citing the above points.
* If insisted, seek clarification from the local Professional Tax Office.
* Alternatively, consult a tax professional or legal expert for official opinion or representation.
---
### Summary:
| Point | Explanation |
| --------------------------- | ------------------------------------------------------------------ |
| Is stipend "salary" for PT? | No, stipend is not salary/wages. |
| Can PT be deducted? | No, not legally justified. |
| Reference | Maharashtra PT Act, Sec 2(h); ITAT case Sudhir Kumar Sharma (1983) |
---
If you want, I can help draft a formal letter or email for your firm referencing this case and law. Would that help?
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