Section 16(ii) of Income Tax Act, 1961 provides for deduction of ‘Entertainment Allowance’, from salary income, to the extent of lower of 20% of salary or Rs. 5,000, in the case of Government employees. It may be noted that deduction on account of entertainment allowance is not available to private sector employees (i.e. non-government employees).
Section 16(ii) of Income Tax provides, for:
a deduction in respect of any allowance in the nature of an entertainment allowance specifically granted by an employer to the assessee who is in receipt of a salary from the Government, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees, whichever is less;