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Reading: Section 16 of the Income Tax Act
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Investment Simplified > Tax > Section 16 of the Income Tax Act
Tax

Section 16 of the Income Tax Act

Ashish Kumar
Last updated: 2023/01/11 at 4:09 PM
Ashish Kumar Published January 11, 2023 3 Min Read
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What is Standard Deduction under Section 16 (i)/(ia)?Is There any Limit to Standard Deduction under section 16 (ia)?What is Entertainment Allowance under section 16 (ii)?What is Tax on Employment or Professional Tax under section 16 (iii)?How can you claim standard deduction under section 16?Section 16 of the Income Tax Act- FAQs

The section 16 of the Income Tax Act offers provisions for certain deductions from the salary income. Under this provision, a taxpayer having an income that is chargeable under the ‘Salaries’ head should be allowed a deduction under section 16 of the Income Tax Act. Under section 16 below given deductions are permitted-

  • Standard Deductions
  • Entertainment Allowance
  • Professional Tax

What is Standard Deduction under Section 16 (i)/(ia)?

It is a flat deduction that is allowed from the salary income. Standard deduction under section 16(ia) can be claimed for the lower amount between the following as a standard deduction from your total salary-

  • ₹50,000 (AY 2020 onwards)

or

  • Salary Amount, whichever is lower
  • Transport Allowance
  • Medical Allowance

Is There any Limit to Standard Deduction under section 16 (ia)?

The standard deduction amount cannot exceed ₹50,000. In case you receive your salary more than ₹50,000, you can deduct only this sum under section 16.

What is Entertainment Allowance under section 16 (ii)?

Deduction under section 16 (ii) or entertainment allowance is included under the head ‘Salary’ in the salary income and after that a deduction is allowed in the following paragraph-

In case of a government employee, the minimum deduction is taken into account for the following-

  • 20% of the basic salary
  • 5,000
  • The allowance amount is granted during the last year

In case of non-government employee-

  • The entertainment allowance is not deductible in this situation

What is Tax on Employment or Professional Tax under section 16 (iii)?

The tax on employment under section 16 (iii) is levied by some state in the article 276 of the Indian Constitution is granted as deducted. Under section 16 (iii) of the Income Tax Act, the state cannot charge more than ₹2,500 per year as a professional tax.

Section 16 allows the salaried individual to save taxes and ultimately lowering tax liability. Therefore, it is important to know the rules and regulations of the taxation system in India.

How can you claim standard deduction under section 16?

In most of the cases, the employer deducts the TDS as per your early salary. The amount that is issued by the employer is reflected in the Form 16. In case employer does not deduct TDS including the standard deduction, you can file the same while filing your Income Tax Return.

Section 16 of the Income Tax Act- FAQs

What is the amount of professional tax payable on salary income?

The amount of professional tax usually depends on the state in which you are employed. However, the maximum professional tax levied by the Income Tax Department cannot exceed ₹2500.

What are the documents required to claim standard deduction under section 16?

At present, there are no documents required to claim standard deduction under section 16 from your salary income.

Can my employer refuse to provide a standard deduction?

No. It is mandatory to provide standard deduction while calculating tax, TDS deduction, and filing an income tax return.

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By Ashish Kumar
Ashish Kumar is a SEO content writing enthusiast and an avid blogger who closely follows the latest financial trends. He writes about various topics related to Insurance, Aadhaar, PAN, Banking and other financial products.
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