Total deduction under section 16(ii) and 16(iii) (specify ea

sec 16 (ii) is entertainment allowance...exemption only for govt employees...exemption will be least of the following...

1> 20%of basic salary

2>  Rs 5000

3> actual received..

section 16(iii) talks about professional tax...in case it is paid by the employer then it is 1st added to salary and then deducted...in case paid by employee then its directly deducted..

regards,

Sneha

Hi,

Section 16(iii)

As per section 16(iii) of Income tax act ,Professional tax on employment or tax on employment levied by state under article 276(2) of the Constitution is allowed as a deduction from the Salary income.

Tax should be Paid By the Employee: Profession tax should have been paid by the Employee, then only he is eligible to get deduction of the same. If he has not paid the same then no deduction is allowed.

Deduction, if Tax paid by the employer on behalf of employee:: If such tax is paid by the employer on behalf of the employee then same amount will be treated as perquisites and then deduction will also be available to the employee.

Section 16(ii)

Some employees are required to incur expenditure on the entertainment (tea etc.) of customers, clients etc. who come to meet them in connection with their official or business work. In case employee is given a fixed amount every month to meet this type of expenditure then it is fully added in salary and out of Gross Total Salary, a deduction u/s 16(u) shall be allowed only to govt. employees. This means that in case this allowance is given to employees working in private sector, it is fully taxable.

But in case any amount is reimbursed against any expenditure incurred by employee, it shall be fully exempted.

Deduction uls 16(ii) admissible to govt. employees shall be an amount equal to least of following :

1. Statutory Limit of ` 5,000 (maximum).
2. 1/5th of Basic Salary.
3. Actual amount of entertainment allowance received during the previous year.

Important Note. The actual expenditure incurred by a government employee on entertainment of customers is not relevant for claiming deduction u/s 16(u).