Specific Deductions available for salaried Employees [AY 2020-21]

Section 16 of Income Tax Act 1961 deals with Specific Deductions available for salaried Employees. The section is presented below for reference:

(ia) a deduction of fifty thousand rupees or the amount of the salary, whichever is less;

(ii) 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;

(iii) a deduction of any sum paid by the assessee on account of a tax on employment within the meaning of clause (2) of article 276 of the Constitution, leviable by or under any law.

Article 276 of the Constitution of India has been presented below for your reference:

Taxes on professions, trades, callings and employments.

Sec 276 (1) Notwithstanding anything in article 246, no law of the Legislature of a State relating to taxes for the benefit of the State or of a municipality, district board, local board or other local authority therein in respect of professions, trades, callings or employments shall be invalid on the ground that it relates to a tax on income.

(2) The total amount payable in respect of any one person to the State or to any one municipality, district board, local board or other local authority in the State by way of taxes on professions, trades, callings and employments shall not exceed two thousand and five hundred rupees per annum.

Specific Deductions available for salaried Employees [AY 2020-21]

The Analysis of section is given below for your reference:

1 . Standard Deduction for salaried class under section 16 as introduced by Finance Act 2019

A deduction of fifty thousand rupees [Rs. 50,000] or the amount of the salary, whichever is less is available for salaried employees.

2 . Entertainment allowance

This deduction is available for government employees.

A sum equal to one-fifth of his salary or five thousand rupees, whichever is less is available for government employees.

This benefit is exclusive of any allowance, benefit or other perquisite.

3 . Employment tax

A deduction of any sum paid by the assessee on account of a tax on employment is available for salaried employees.

As per the constitution of India, Employment Tax of upto Rs. 2500 can be charged by the government.