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8th Pay Commission: The Staff Side of the National Council-Joint Consultative Machinery (NC-JCM) has placed a new demand before the 8th Pay Commission regarding central government employees. This move aims to significantly reduce their tax burden.

8th Pay Commission: Central government employees are eagerly awaiting the implementation of the 8th Pay Commission. The Commission is currently in 'action mode' regarding this matter; meetings are being held with employee unions across various states to gather suggestions and carefully consider their demands. Amidst this, the Staff Side of the NC-JCM has proposed a complete exemption for central employees from the 'Professional Tax' levied by state governments.

What is Professional Tax?

Under Article 276 of the Indian Constitution, all state governments have the authority to levy and collect Professional Tax. It is deducted based on varying tax slabs within the state; however, the maximum annual limit is capped at ₹2,500. Central employees who have opted for the 'Old Tax Regime' are eligible for a deduction on the Professional Tax deducted from their salaries under Section 16(3) of the Income Tax Act. In contrast, no such deduction is available under the 'New Tax Regime'.

What is the demand of the employee unions?

The employees' representatives argue that central government employees already pay substantial taxes to the Centre. They also pay GST (Goods and Services Tax) on the consumption of daily necessities. Given this, the deduction of Professional Tax from their salaries by state governments imposes an additional financial burden on them. In the memorandum submitted to the Commission, the NC-JCM Staff Side has requested that the 8th Pay Commission include a recommendation in its final report to exempt all central government employees from Professional Tax.

Why do state governments levy professional tax?

State governments levy professional tax to generate revenue because they have limited avenues for taxation. A significant portion of direct tax revenue goes to the Central Government. Consequently, states impose professional tax to ensure the smooth functioning of healthcare, education, and government schemes. The funds collected through this tax are transferred to municipal corporations or local bodies, which utilize the money for sanitation, water supply, road maintenance, street lighting, and the development of parks and other amenities.