{"id":24082,"date":"2021-12-22T09:00:59","date_gmt":"2021-12-22T09:00:59","guid":{"rendered":"https:\/\/www.legalraasta.com\/blog\/?p=24082"},"modified":"2026-04-07T17:15:38","modified_gmt":"2026-04-07T11:45:38","slug":"section-16","status":"publish","type":"post","link":"https:\/\/www.legalraasta.com\/blog\/section-16\/","title":{"rendered":"Section 16- Standard Deduction, Entertainment Allowance and Professional Tax"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_73 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.legalraasta.com\/blog\/section-16\/#Section_16_of_Income_Tax_Act_1961\" title=\"Section 16 of Income Tax Act, 1961\">Section 16 of Income Tax Act, 1961<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.legalraasta.com\/blog\/section-16\/#Standard_Deduction_From_Salary_under_section_16_ia\" title=\"Standard Deduction From Salary under section 16 (ia)\">Standard Deduction From Salary under section 16 (ia)<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.legalraasta.com\/blog\/section-16\/#The_amount_of_deduction_available_under_section_16_for_standard_deduction_is\" title=\"The amount of deduction available under section 16 for standard deduction is:\">The amount of deduction available under section 16 for standard deduction is:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.legalraasta.com\/blog\/section-16\/#Illustration_on_Calculation_of_Standard_deduction\" title=\"Illustration on Calculation of Standard deduction\">Illustration on Calculation of Standard deduction<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.legalraasta.com\/blog\/section-16\/#Entertainment_Allowance_Under_Section_16_ii\" title=\"Entertainment Allowance Under Section 16 (ii)\">Entertainment Allowance Under Section 16 (ii)<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.legalraasta.com\/blog\/section-16\/#Entertainment_Allowance_for_a_Government_Employee\" title=\"Entertainment Allowance for a Government Employee\">Entertainment Allowance for a Government Employee<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.legalraasta.com\/blog\/section-16\/#Entertainment_Allowance_for_a_Non-Government_Employee\" title=\"Entertainment Allowance for a Non-Government Employee\">Entertainment Allowance for a Non-Government Employee<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.legalraasta.com\/blog\/section-16\/#Illustration_on_Calculation_of_deduction_against_Entertainment_Allowance\" title=\"Illustration on Calculation of deduction against Entertainment Allowance\">Illustration on Calculation of deduction against Entertainment Allowance<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.legalraasta.com\/blog\/section-16\/#Professional_Tax_or_Tax_on_Employment_Under_Section_16_iii\" title=\"Professional Tax or Tax on Employment\u00a0Under Section 16 (iii)\">Professional Tax or Tax on Employment\u00a0Under Section 16 (iii)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.legalraasta.com\/blog\/section-16\/#Frequently_Asked_Questions\" title=\"Frequently Asked Questions\">Frequently Asked Questions<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Section_16_of_Income_Tax_Act_1961\"><\/span><strong>Section 16 of Income Tax Act, 1961<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Section 16 of the Income Tax Act of 1961 allows for a deduction from taxable income under the heading of &#8220;salaries.&#8221; It allows for basic deductions, entertainment allowances, and professional tax deductions. A salaried taxpayer can use this deduction to reduce the amount of taxable salary income that is subject to tax.<\/p>\n<p>Furthermore, as a result of recent standard deduction revisions, the benefit of this section is now extended to a larger sum. Furthermore, there is no need to provide travel or medical costs, making it simple to file a claim.<\/p>\n<p>We&#8217;ll go over each of the deductions under section 16 in this post, along with examples of how to calculate them.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Standard_Deduction_From_Salary_under_section_16_ia\"><\/span><strong>Standard Deduction From Salary under section 16 (i<\/strong>a)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Section 16ia of the Income Tax Act allows for a standard deduction. Transport allowance of Rs 19200 and medical reimbursement of Rs 15000 were replaced by the standard deduction. Our Finance Minister, Arun Jaitley, announced it in the 2018 budget.<\/p>\n<p>In lieu of transport allowance and medical reimbursement, the 2018 budget proposed a standard deduction of Rs 40,000. A taxpayer does not need to provide a bill or proof of expenditure to claim this Rs 40,000 deduction. It stipulates a one-time deduction of Rs 40,000.<\/p>\n<p>The 40,000-rupee deduction was increased to 50,000-rupees in the Interim Budget of 2019. As a result, the deduction in FY 2018-19 was Rs 40,000, and it will be Rs 50,000 in FY 2019-20.<\/p>\n<p>Pensioners can also take advantage of the standard deduction. The CBDT published a clarification about the standard deduction&#8217;s applicability to retirees. The pension that a taxpayer receives from his or her previous employer will be taxed under the heading of &#8220;salaries.&#8221; The deduction will be available to pensioners under section 16 because the pension received is taxed under the heading of &#8220;salaries.&#8221;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"The_amount_of_deduction_available_under_section_16_for_standard_deduction_is\"><\/span><strong>The amount of deduction available under section 16 for standard deduction is:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<ul>\n<li>Salary received<\/li>\n<\/ul>\n<p>Or<\/p>\n<ul>\n<li>Rs 50000<\/li>\n<\/ul>\n<p>Whichever one is the lowest<\/p>\n<p>Remember that the standard deduction has nothing to do with the <strong><a href=\"https:\/\/www.legalraasta.com\/itr\/80c-deductions\">deduction under Section 80C<\/a>\u00a0<\/strong>or any other part of Chapter VIA.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Illustration_on_Calculation_of_Standard_deduction\"><\/span>Illustration on Calculation of Standard deduction<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table width=\"672\">\n<tbody>\n<tr>\n<td>Particulars<\/td>\n<td>FY 2018-19AY 2019-20(Rs)<\/td>\n<td>From FY 2019-20From AY 2020-21(Rs)<\/td>\n<\/tr>\n<tr>\n<td>Basic Salary + Dearness Allowance<\/td>\n<td>800000<\/td>\n<td>800000<\/td>\n<\/tr>\n<tr>\n<td>Other Taxable Allowance<\/td>\n<td>100000<\/td>\n<td>100000<\/td>\n<\/tr>\n<tr>\n<td>Gross Salary<\/td>\n<td>900000<\/td>\n<td>900000<\/td>\n<\/tr>\n<tr>\n<td>Standard Deduction<\/td>\n<td>40000<\/td>\n<td>50000<\/td>\n<\/tr>\n<tr>\n<td>Total Income<\/td>\n<td>860000<\/td>\n<td>850000<\/td>\n<\/tr>\n<tr>\n<td>Other Deductions<\/td>\n<td>200000<\/td>\n<td>200000<\/td>\n<\/tr>\n<tr>\n<td>Income Chargeable to Tax<\/td>\n<td>660000<\/td>\n<td>650000<\/td>\n<\/tr>\n<tr>\n<td><strong><a href=\"https:\/\/www.legalraasta.com\/income-tax-return\/\">Income Tax<\/a><\/strong><\/td>\n<td>44500<\/td>\n<td>42500<\/td>\n<\/tr>\n<tr>\n<td>Income Tax Saving<\/td>\n<td>\u2013<\/td>\n<td>2000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><span class=\"ez-toc-section\" id=\"Entertainment_Allowance_Under_Section_16_ii\"><\/span>Entertainment Allowance Under Section 16 (ii)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The entertainment allowance is first included in the pay income before being deducted based on a few conditions. The allowance must be an entertainment allowance specifically granted by an employer to the taxpayer.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Entertainment_Allowance_for_a_Government_Employee\"><\/span>Entertainment Allowance for a Government Employee<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The deduction applicable to employees of the federal and state governments is the least of the following:<\/p>\n<ol>\n<li>20% of the basic pay<\/li>\n<li>5000 rupees<\/li>\n<li>The amount of entertainment allowance given throughout the fiscal year<\/li>\n<\/ol>\n<p><strong>To calculate the allowance, a taxpayer must meet the following requirements:<\/strong><\/p>\n<ol>\n<li>Salary shall not include any other allowances, benefits, or perquisites received from the employer. Essentially, the wage must be the gross amount earned before any extra benefits are taken into account.<\/li>\n<li>Never take into account the actual amount spent from the employer&#8217;s entertainment budget.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Entertainment_Allowance_for_a_Non-Government_Employee\"><\/span>Entertainment Allowance for a Non-Government Employee<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Non-government employees are not eligible for the entertainment allowance deduction. The deduction is only available to employees of the federal or state governments. Furthermore, the deduction is not available to employees of local governments or statutory corporations.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Illustration_on_Calculation_of_deduction_against_Entertainment_Allowance\"><\/span>Illustration on Calculation of deduction against Entertainment Allowance<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table width=\"672\">\n<tbody>\n<tr>\n<td>Particulars<\/td>\n<td>Amount<\/td>\n<\/tr>\n<tr>\n<td>Salary (Excluding other allowances, benefits, and perquisites)<\/td>\n<td>120000<\/td>\n<\/tr>\n<tr>\n<td>Entertainment Allowance Received Per Month<\/td>\n<td>1000<\/td>\n<\/tr>\n<tr>\n<td>Entertainment Allowance for the entire financial year<\/td>\n<td>12000<\/td>\n<\/tr>\n<tr>\n<td>Amount of deduction available:<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>20% of salary (a)<\/td>\n<td>24000<\/td>\n<\/tr>\n<tr>\n<td>Rs 5000 (b)<\/td>\n<td>5000<\/td>\n<\/tr>\n<tr>\n<td>Actual Amount Received (c)<\/td>\n<td>12000<\/td>\n<\/tr>\n<tr>\n<td>The amount allowed as a deduction (least of a, b and c)<\/td>\n<td>5000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><span class=\"ez-toc-section\" id=\"Professional_Tax_or_Tax_on_Employment_Under_Section_16_iii\"><\/span><strong>Professional Tax or Tax on Employment<\/strong>\u00a0Under Section 16 (iii)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Section 16iii of the Income Tax Act allows for a deduction for employment taxes. Section 16 allows a taxpayer to deduct the amount paid on account of a tax on employment or <strong><a href=\"https:\/\/www.legalraasta.com\/professional-tax-registration\/\">professional tax<\/a><\/strong>. The employment tax is allowed for in Article 276 (2) of the Constitution.<\/p>\n<p>When computing the deductions against professional tax, keep the following points in mind:<\/p>\n<ol>\n<li>The deduction can only be claimed in the fiscal year in which the professional tax is actually paid to the government.<\/li>\n<li>The tax paid on behalf of the employee by the company is also deductible. The amount paid by the employer as professional tax will be included in the total remuneration initially as a condition. Later, under section 16, the same amount will be permitted as a deduction.<\/li>\n<li>The deduction has no upper or lower limit under Section 16 of the Income Tax Act. The deduction is exclusively determined by the amount of professional tax paid. Any state government, however, cannot collect a professional tax of more than Rs 2500 per year. Only the tax paid is deductible, not the interest or late charge incurred as a result of the delay or nonpayment of professional tax.<\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions\"><\/span>Frequently Asked Questions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><strong>Can I take a deduction for entertainment allowance if I am not a government employee?<\/strong><\/p>\n<p>No, you cannot claim an entertainment allowance deduction. Only employees of the federal or state governments are eligible for the deduction.<\/p>\n<p><strong>Is it necessary for me to provide proof of expenses in order to claim the standard deduction?<\/strong><\/p>\n<p>Previously, you had to submit medical and travel expenses in order to claim a deduction. Your employer then evaluated the bills and approved the deduction. You do not need to submit any bills to claim a standard deduction, though. You will automatically receive the deduction without having to submit any bills.<\/p>\n<p><strong>Is it legal for my employer to decline to make a standard deduction?<\/strong><\/p>\n<p>No, the standard deduction must be taken into account when computing tax due, deducting TDS and submitting an <strong><a href=\"https:\/\/www.legalraasta.com\/income-tax-return\/\">income tax return<\/a><\/strong>.<\/p>\n<p><strong>When filing a tax return, how do you enter the standard deduction?<\/strong><\/p>\n<p>A taxpayer can file an ITR using either the &#8216;Download Utility&#8217; or the &#8216;Prepare and Submit Online&#8217; options. The details will be pre-filled in the Prepare and Submit Online mode; you must confirm the details before filing. You must enter the details and then submit the ITR in the &#8216;Download Utility&#8217; option.<\/p>\n<blockquote><p>Read, also:\u00a0<a href=\"https:\/\/www.legalraasta.com\/blog\/calculate-advance-tax-deposit\/\">How to calculate advance tax and when to deposit it?<\/a><br \/>\n<a href=\"https:\/\/www.legalraasta.com\/blog\/minimum-alternate-tax-mat\/\">Tax Planning Under Minimum Alternate Tax (MAT)<\/a><\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>Section 16 of Income Tax Act, 1961 Section 16 of the Income Tax Act of 1961 allows for a deduction from taxable income under the heading of &#8220;salaries.&#8221; It allows for basic deductions, entertainment allowances, and professional tax deductions. A salaried taxpayer can use this deduction to reduce the amount of taxable salary income that is [&hellip;]<\/p>\n","protected":false},"author":15,"featured_media":24683,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[760],"tags":[4860,469,2688,470,918,4858,4859],"class_list":["post-24082","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-income-tax","tag-entertainment-allowance","tag-income-tax","tag-income-tax-act","tag-income-tax-return","tag-professional-tax","tag-section-16","tag-standard-deduction"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Section 16- Standard Deduction, &amp; Professional Tax | LegalRaasta<\/title>\n<meta name=\"description\" content=\"Section 16 of the Income Tax Act of 1961 allows for a deduction from 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