Mr zna central goverment employee gets rupees 18000 p.a. as entertainment allowance out of which he spends rupees 2,500 for official purpose rupees 1,800 for personal purposes and save the balance rupees 13,700 basic salary of Z amounts to rupees 50,000. Compute the taxable entertainment allowance
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Answer:
The salary break up of a government employee is slightly different than that of a private sector personnel. A government employees’ salary is a break up of gross income, house rent allowance, dearness allowance, travelling allowance, provident fund and taxes. Interestingly, one of the perks for being a state-owned employee is also that you get many benefits like pensions, arrears and incentives. But did you know that you can claim deductions in entertainment allowances as well? The Income Tax Department allows employees to claim entertainment allowance under section 16(ii). However, this allowance is fully taxable for private sector workers, and is solely meant for central and state government employees.
An entertainment allowance is a sum given by employer, to their employees for their expense in meals, hotels, drinks and even movies. 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. This is exclusive of any allowance, benefit or other perquisite. One-fifth would be 20% of gross salary. An individual can claim their deductions from salary under section 16 including entertainment allowances, while filing their Income Tax Return (ITR). This one needs to be filed in ITR form1.
The same is available in form 16. The form contains the evidence of TDS which is deducted from your salary and deposited with authorities. Issued annually on or before June 15 of every year, the Form contains information needed to file your ITR.
Now that deadline for ITR filing is nearing on July 31, 2019, make sure you have also included deductions in entertainment allowances.
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