CA Aashish Ramchand

The provisions regarding the entertainment allowance and its deduction from salary are discussed below –

Entertainment allowance as per Section 16(ii) is first included in salary income under the head “Salaries” and thereafter a deduction is given on the basis enumerated in the following points:

A. In the case of a Government employee (i.e., Central Government or a State Government employee), the least of the following is deductible:

1. 5,000

2. 20 percent of basic salary ; or

3. Amount of entertainment allowance granted during the previous year.

In order to determine amount of entertainment allowance deductible from salary Income, the following points need consideration:

1. For this purpose “salary” excludes any allowance, benefit or other perquisites.

2. Amount actually expended towards entertainment (out of entertainment allowance received) is not taken into consideration.

In the case of a non-Governmental employee (including employees of statutory corporation and local authority), entertainment allowances is not deductible, and are completely chargeable to tax.

(Author is CA by profession &   Co-Founder of  Make My Returns (www.makemyreturns.com) & can be reached at [email protected])

Also Read:

  1. https://taxguru.in/income-tax/salary-allowances-exemption-depend-expenditure.html
  2. https://taxguru.in/income-tax/most-popular-exempt-allowances-for-salaried-employees.html

(Republished With Amendments)

More Under Income Tax

7 Comments

  1. CHANDRA SHEKHAR SINGH says:

    I am state govt servent salare above 50000 per month but not recived entertainment allowance . I want exemption per year as per rule .proper gide 5000 per month / year or 20 % of basic saleri or only granted of entertainment allowance or recived please repli

  2. nemichand baletia says:

    my relative state govt sevent salare above 1200000 but not recived entertainment allowance . he want exemption per year as per rule .proper gide 5000 per month / year or 20 % of basic saleri or only grented of entertainment allowance or recived please repli

  3. k kumar says:

    Kindly let me know how much an employee claim as deduction from salary for the following exps assuming a Co includes these as part of salary
    Petrol
    Food
    Entertainment
    Mobile bills
    Books and periodicals

    I shall be thankful if you could e mail your answers

    Best Regards
    k.kumar
    Sr.Accountant
    Menorah Group
    Mumbai

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