Treatment of Entertainment Allowance for Calculating Salary Income
This deduction is allowed only to a Government employee. Non-Government employees shall not be eligible for any deduction on account of any entertainment allowance received by them.
In case of entertainment allowance, the ssesse is not entitled to any exemption but he is entitled to a deduction under section 16(ii) from gross salary. Therefore, the entire entertainment allowance received by any employee is added in computation of the gross salary. The Government employee is, then, entitled to deduction from gross salary under section 16(ii) on account of such entertainment allowance to the extent of minimum of the following 3 limits.
Actual entertainment allowance received during the previous year.
20% of his salary exclusive of any allowance, benefit or other perquisite.
For purpose of deduction in respect of entertainment allowance, the actual amount spent towards entertainment expenses is irrelevant. Even if the Government employee spends the entire amount of entertainment allowance or even an amount greater than the entertainment allowance received is spent on entertainment for official purposes, the deduction shall be minimum of the above 3 limits.
Amount actually spent out of entertainment allowance is irrelevant for claiming deduction.
Sumptuary allowance has to be treated as an entertainment allowance.
For this purpose “salary” excludes any allowance, benefit or other perquisites.
All efforts are made to keep the content of this site correct and up-to-date. But, this site does not make any claim regarding the information provided on its pages as correct and up-to-date. The contents of this site cannot be treated or interpreted as a statement of law. In case, any loss or damage is caused to any person due to his/her treating or interpreting the contents of this site or any part thereof as correct, complete and up-to-date statement of law out of ignorance or otherwise, this site will not be liable in any manner whatsoever for such loss or damage.
The visitors may click here to visit the web site of Income Tax Department for resolving their doubts or for clarifications