Is entertainment allowance taxable for government employees?
Government employees are allowed to claim exemption on entertainment allowance as per section 16 (ii) but have a limit of the following i) 20\% of gross salary (excluding all other allowance, benefits, and perks), ii) Actual entertainment allowance and iii) INR 5000.
Who is not entitled to deduction of entertainment allowance?
In case of entertainment allowance the assessee is not entitled to any exemption but he is entitled to a deduction u/s 16(ii). Therefore the entire entertainment allowance is added in the computation of gross salary and then the Government employee is entitled to deduction from gross salary.
Who can avail entertainment allowance?
The deduction against entertainment allowance is not available to non government employees. Only the Central or State Government employees are eligible for the deduction. Moreover, the employees of local authorities and statutory corporations are not eligible for the deduction.
Which allowances are taxable under government employee?
Taxable, Non-Taxable and Partially Taxable Allowances AY 2020-21
- Dearness allowance.
- Entertainment allowance.
- Overtime allowance.
- City compensatory allowance.
- Interim allowance.
- Project allowance.
- Tiffin/meals allowance.
- Uniform allowance.
Which allowances are exempted from income tax?
Exemption of Allowances
- House Rent Allowance. A salaried individual having a rented accommodation can get the benefit of HRA (House Rent Allowance).
- Standard Deduction.
- Leave Travel Allowance (LTA)
- Mobile reimbursement.
- Books and Periodicals.
- Food coupons.
- Relocation allowance.
- Children Allowances.
What is deduction under entertainment allowance?
According to section 16(ii), a deduction in respect of any allowances in the nature of entertainment specifically granted by an employer to the assessee who is in receipt of a salary from the government. The sum which is equal to one-fifth of his or her salary, or Rs 5,000 whichever is less allowed for deduction.
Which deduction is allowed to government employees only?
Government employees are allowed to deduct the allowance from their gross salary by using the minimum of actual allowance/ one-fifth of the salary (excluding any allowance, benefits or other perquisites) / ₹5,000. This helps in reducing their overall tax burden.
What exemptions are tax exempt?
| S. No. | Section | Limit of exemption |
|---|---|---|
| 4. | – | Fully Exempt |
| 5. | 10(45) | Fully Exempt |
| 6. | – | Fully Exempt Individual – Government employee |
| 7. | 16 (ii) | Least of the following is exempt from tax: a) Rs 5,000 b) 1/5th of salary (excluding any allowance, benefits or other perquisite) c) Actual entertainment allowance received |
What is entertainment allowance in income tax?
Entertainment Allowance: Employees are allowed the lowest of the declared amount one-fifth of basic salary, actual amount received as allowance or Rs. 5,000. This is an allowance provided to employees to reimburse the expenses incurred on the hospitality of customers. This allowance is fully taxable.