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of <h1>Employer Allowances Limited: Only 20% Deductible u/ss 40(c)(iii) and 40(a)(v); Bonus and Commission Clarifications Provided.</h1> The circular addresses the limitation on allowances for benefits, amenities, or perquisites provided by employers to employees. Under sections 40(c)(iii) and 40(a)(v), such allowances are deductible only up to one-fifth of the employee's salary. It clarifies that reimbursements for medical expenses, utilities, and other benefits are considered perquisites. Bonus payments are treated as salary if stipulated by a service agreement or legal obligation, otherwise, they are perquisites. The classification of commission depends on whether it is part of the contractual salary or a discretionary benefit. Previous circulars inconsistent with these provisions are withdrawn.
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