Section 16 of the Income Tax Act allows taxpayers to claim a deduction from salary: u/s 16(ia), u/s 16(ii), and u/s 16(iii) from Income from Salaries.
| Section | Eligible taxpayers | Allowable deduction from salary | ITR Filing | Taxpayer filing ITR u/s 115BAC |
| 16(ia) | Individuals – Salaried employee and Pensioners | (i) Rs.50,000/- [w.e.f 1st April 2020, earlier to this period deduction of Rs.40,000/- was allowed u/s 16(ia)] or (ii) the amount of Salary (Salary includes Pension received during the previous financial year) [whichever is less] | Taxpayer has to enter the standard deduction admissible u/s 16(ia) as per Part B of Form 16 | No deduction available to the assessee. |
| 16(ii) | Government Employees | (i) 20% or 1/5 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 of his salary excluding any allowance, benefit or other perquisite. Or (ii) Actual, Maximum up to Rs.5,000/- [whichever is less] | Taxpayer has to enter the standard deduction admissible u/s 16(ii) as per Part B of Form 16 | No deduction available to the assessee. |
| 16(iii) | Salaried taxpayers | A deduction of any sum paid by the taxpayer 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. | Taxpayer has to enter the standard deduction admissible u/s 16(ii) as per Part B of Form 16 | No deduction available to the assessee. |
Filing of ITR under the seventh proviso to section 139(1)
Income chargeable to tax under the head salaries includes:
- Gross Salary [(including provisions contained in section 7(1), the value of perquisites u/s 17(2), profit in lieu of salary u/s 17(3)]
- Allowances to the extend exempt u/s 10.
- Deduction’s u/s 16
