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of <h1>Government Employees: Deduction for Entertainment Allowance and Professional Tax Under Income Tax Act Sections 16(ii) and 16(iii) Explained.</h1> Section 16(ii) of the Income Tax Act allows a deduction for entertainment allowance to government employees, limited to the least of 5,000, 20% of salary (excluding allowances and benefits), or the actual allowance received. This allowance is added to gross salary, and then the deduction is applied. Section 16(iii) addresses professional tax: if paid by the employee, it is deductible from gross salary; if paid by the employer, it is added as a perquisite before deduction. Unpaid professional tax is not deductible.
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