Question

8. The entertainment allowance received by a Government employee is exempt up to the lower of the actual
entertainment allowance received, 1/5th of basic salary and -
2 MARKS
(a) 4.000
(b) 36,000
c) 35,000
(d) 10,000.​

Answer 1

Explanation:

The provisions regarding the entertainment allowance and its deduction from salary are discussed below –

Entertainment allowance as per Section 16(ii) is first included in salary income under the head “Salaries” and thereafter a deduction is given on the basis enumerated in the following points:

A. In the case of a Government employee (i.e., Central Government or a State Government employee), the least of the following is deductible:

1. 5,000

2. 20 percent of basic salary ; or

3. Amount of entertainment allowance granted during the previous year.

In order to determine amount of entertainment allowance deductible from salary Income, the following points need consideration: