Normally for allowances, the amount exempt is mentioned. However for entertainment allowance, deduction amount is provided in Income tax and not the exemption amount.

The total amount of Entertainment Allowance is first included in Gross Salary and then deduction is provided

 

Maximum deduction is lower of the following

  • Actual amount received
  • 20% of basic salary
  • 5000 

However, this deduction is provided only for Government employees. For Non Government employees it is fully taxable

Note :- Entertainment  allowance is also called sumptuary allowance  

 

Question 1            

Basic salary  Rs 20000 per month

Dearness allowance (DA) Rs 10000 per month

Entertainment allowance   Rs 5000 per month  

Calculate income from salary assuming employee is a Government Employee

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Question.2   

Solve Question 1 assuming it a non government employe e  

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  1. Income Tax
  2. Income from Salaries

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CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides GST Training in Delhi. Register now.