Home Entertainment Allowance
Entertainment allowance is an extra compensation paid to the employees for organizing entertainment events, hotel stays, meals, movies, etc. Entertainment allowance received is fully taxable and is first included in the salary and thereafter an eligible deduction is to be made from gross salary. However, deduction in respect of entertainment allowance is available only in case of Government employees and fully taxable for private employees.
Government employees can claim the LEAST of the following as a deduction for entertainment allowance:
(i) 20% of an individual’s basic salary
(ii) Rs. 5,000
(iii) The actual amount received towards entertainment allowance
This deduction is not available for individuals working in private firms or any statutory or local authorities.
Entertainment allowance calculation is done based on following:
1. Salary for calculation means only Basic salary without any benefits, perquisites or any other allowances
2. The actual amount spent by an individual from the received entertainment allowance must not be considered
Mr. Chirag received the following compensation during the year from his employer:
| Particulars | Amount (In Rs.) – Per Annum |
|---|---|
| Basic Salary | 5,00,000 |
| Dearness Allowance | 2,50,000 |
| Commission | 1,00,000 |
| Entertainment Allowance received | 40,000 |
Therefore, the amount to be deductible will be LEAST if the following:
| Particulars | Amount (In Rs.) – Per Annum |
|---|---|
| (i) 20% of Basic Salary { 20% * 5,00,000 } | 1,00,000 |
| (ii) Rs. 5,000 Maximum Amount | 5,000 |
| (iii) Actual entertainment allowance received | 40,000 |
| Exemption: LEAST of (i) to (iii) | 5,000 |
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