CERTAIN DEDUCTIONS UNDER SECTION 16
CERTAIN DEDUCTIONS UNDER SECTION 16
Standard deduction- 16(ia) :-
A deduction of Rs.50,000.
Entertainment Allowance – Section 16(ii)
Ø
Purpose: Entertainment allowance is given
by the employer to meet the expenditure incurred by the employees in entertaining the customers of the employer.
Ø
Taxability: Entertainment allowance is first
included in the gross salary
of the employee and thereafter deduction is allowed u/s 16(ii)
in the manner given below:
Ø
Deduction: Only
government employees (state/central) are entitled to claim deduction u/s
16(ii). Least of the following three figures
is available as deduction irrespective of the expenditure actually incurred by the employee:
Ø Actual entertainment allowance received from the employer; or
Ø 20% of salary exclusive of any allowance, benefit or perquisite; or
Ø Rs 5,000
Professional Tax – Section 16(ii)
Article 276 of the Constitution of India empowers State Governments/Local Authorities to collect tax on profession, trade and employment. Such tax is commonly known as 'professional tax'.
|
Particulars |
Deductibility
of Professional Tax |
|
If professional tax is paid
by a person engaged in
carrying, on business/profession |
Professional
tax is allowed to be debited to P&L A/c on actual payment
basis. |
|
If
professional tax is paid by the employee himself |
Professional tax
is allowed as deduction from
gross salary u/s 16(iii) on
actual payment basis. |
|
If professional tax is paid
by the employer on |
Ø Professional tax so
paid by the
employer shall be
first taxable as
a |
|
behalf
of the employee |
monetary perquisite in the hands
of the employee u/s 17(2)(iv) Ø
Subsequently, such
professional tax so paid by the employer is allowed as deduction from gross salary
u/s 16(iii) on actual payment
basis. |
Compute taxable Entertainment allowance & net salary of Sri Hanuman Prasad from the following data: Basic salary ` 8,000 p.m. D.A. ` 2,000 p.m. Taxable perquisite ` 35,000, Entertainment Allowance ` 4,000 p.m. Out of such allowance ` 20,000 is expended and balance amount is saved. Assuming he is: a. Government employee b. Non-Government employee.
Mr. Rohit a non-Government employee
has the following salary details : a. Basic
Salary ` 5,000
p.m. b. D.A.
` 2,000 p.m.
c. Entertainment Allowance ` 300 p.m.
d. Professional tax
paid by employee
` 600 e. LIC Premium
paid by employer
` 3,600 f. Income tax paid by employee ` 2,000 g. Professional tax paid by employer on behalf of employee ` 1,600 Find his taxable salary.
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