Deduction from Gross Salary [Sec. 16]
Entertainment Allowance [Sec. 16 (ii)]
Entertainment allowance is initially included in taxable allowances as fully taxable. Thereafter, a deduction is allowed under this section from gross taxable salary. However deduction u/s 16(ii) shall be available to the Government employee only.
Deduction for Entertainment allowance being minimum of the following:
a. Actual Entertainment Allowance
c. 20% of Basic Salary.
Tax on employment or professional tax [Sec. 16(iii)]
Tax on employment, profession, trade, etc. levied by a State under Article 276 of the Constitution will be allowed as deduction on cash basis, whether paid by employee or by employer (on behalf of employee) from gross taxable salary.
Note: If employer (on behalf of employee) pays Professional tax then:
- Firstly, it is to be included as taxable perquisite; and
- Further, it is allowed as deduction u/s 16(iii).