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:

  • In the case of a Government employee (i.e., Central Government or a State Government employee), the least of the following is deductible:
  1. Rs. 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, 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 connect@makemyreturns.com)

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5 responses to “Entertainment allowance & its deduction from salary”

  1. srikanth says:

    Employee of Indian railways is eligible for deduction under section 16(ii)

  2. V Jyothi Prasanth says:

    Its really very helpful…????

  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

  4. pinkish popli says:

    Does salary for treatment of entertainment allowance includes commission on net sales?

  5. Joseph says:

    Sir can I get Rs 5000 deduction even there is no allowance paid as entrainment allowance. I am working in gov service

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