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Income-tax Act, 1961 · Chapter IV: Computation of Total Income · A.—Salaries

Section 16: Deductions from salaries

The Income-tax Act, 1961 was repealed by the Income-tax Act, 2025 from 1 April 2026. The text is kept here because the judgments below apply it.

In plain words

Salary income is computed after allowing certain deductions from it.

  • A Government employee may deduct entertainment allowance, up to one-fifth of salary or five thousand rupees, whichever is less.
  • Tax on employment paid under article 276 of the Constitution is deductible.

A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.

Official text

The income chargeable under the head —Salaries‖ shall be computed after making the following deductions, namely:— [* * * * *

(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.] * * * *

Source: India Code (Legislative Department), the text of the Act as it stood before its repeal. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.

Supreme Court judgments citing the section 16