2. City/Capital compensatory Allowance. These are given to compensate for the high cost of living in a particular big city of India or any other capital city. These are also fully taxable.
3. Lunch / Tiffin / Marriage / FamiLy / Deputation / Wardenship / Non-practising / Project / Overtime / Fixed Medical Allowance.These allowances are fully taxable.
4. Entertainment Allowance :.
This allowance is fully taxable irrespective of any expenditure incurred on entertainment of guests or customers. But in case any amount is reimbursed against any expenditure incurred by employee on entertainment of guests or customers it shall be fully exempted. U/s 16(u) a deduction is allowed to those persons who receive this allowance. Till assessment year 2001-02 this deduction was admissible both to Government as well as private sector emplo’ees. But with effect from assessment year 2003-04 this deduction is admissible only to Government employees for an amount equal to least of following :
Important Note: The actual expenditure incurred by a government employee on entertainment of customers is not relevant for claiming deduction u/s 16(u).
- Statutory Limit 5,000 ;
- 1/5 th of basic salary only ; or
- Actual entertainment allowance received during the previous year.