In general, your employer includes this deduction when calculating the tax deducted at source (TDS) on your annual salary. Form 16 should reflect this amount. The standard deduction can, however, be claimed if it is not included.
When Claiming the Standard Deduction, Which Documents or Bills Must Be Presented?
No proof of expenses is required to get the standard deduction. No proof of expenses has to be submitted to your employer or to the tax department.
- The entertainment allowance [Section 16(ii)]
- a) Employees of the government
The available deduction is the least among the following if you are a Central Government employee or State Government employee.
- Five thousand
- Including perquisites, benefits, and other allowances, 20% of your basic pay
- Entertainment allowance is the actual amount provided by your employer
Whether you actually spent money on entertainment does not affect the deduction.
- b) Employees outside of government
In the case of non-government employees, the entertainment allowance is not applicable.
- Section 16(iii) – Professional Tax or Employment Tax
There are some Indian states that levy a professional tax registration or direct tax on employment, under article 276(2) of the Indian constitution. If one earns an income, he or she must pay the tax.
Following are the rules for deducting this taxation from salary under the tax laws:
- Professional tax payment is considered a ‘perquisite’ in your salary if your employer paid it on your behalf. A deduction can be made from your gross salary for this expense. As an example, if your base salary is *2,50,000, you must pay *400 as professional tax per month, and your employer pays it for you. If you received a gross salary of 2,50,000 plus 400 times 12 = 2,54,800, you can deduct *4,800 on account of professional tax from it. Therefore, your net income is ₹2,50,000.
- As a result, you did not receive the tax money from your employer if your employer deducted the tax from your salary. The amount should not be added to your income under the heading ‘Salaries.’ For example, suppose your annual income is $2,500,000. The amount of professional tax you pay during the year is $5,000, which you can deduct from your salary.
- There is no limit to the amount of professional taxes that may be deducted under the ITA.
- You can claim the deduction only in the year in which you pay the professional tax. If the tax is due but you haven’t paid it yet, it cannot be claimed. Last financial year, you failed to pay your professional tax of *1,500. In this financial year, you pay your professional tax of *3,000.
So, instead of just *2,500, *3,000 is deductible this year.
As a conclusion
In the event you are a salaried individual, Section 16 may offer substantial savings on your tax outgo. Knowing the rules will help you calculate the exact tax amount to pay. offers a tax and savings guide to help individuals save.