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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.

  1. Actual entertainment allowance received during the previous year.

  2. 20% of his salary exclusive of any allowance, benefit or other perquisite.

  3. ₹. 5,000.

Note :

  1. 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.

  2. Amount actually spent out of entertainment allowance is irrelevant for claiming deduction.
  3. Sumptuary allowance has to be treated as an entertainment allowance.
  4. For this purpose “salary” excludes any allowance, benefit or other perquisites.
Contents : Salary Income

 Important Links....for calculating Salary Income

(A). Salary -Definition & Meaning
(B). Provident Fund
(C). Allowance
(D). Perquisites
(E). Profit in lieu of Salaly
(F). Retirement Benefits
(G). Deductions
(H). Table Presentation of Salary Income (Section 15 to 17)

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