CBDT issued a circular no. 20/2015 dated 2 December 2015 about income tax deduction from salary for financial year 2015-16 relevant to analysis year 2016-17. Income tax deduction under section 16 from salary for analysis year 2016-17 are as follows.
Entertainment Allowance [Section 16(ii)]:
A deduction is also allowed under section 16(ii) 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. No deduction on account of entertainment allowance is available to non government employees.
Tax on Employment [Section 16(iii)]:
The tax on employment (Professional Tax) within the meaning of article 276(2) of the Constitution of India, leviable by or under any law, shall also be allowed as a deduction in computing the income under the head "Salaries".
It may be clarified that “Standard Deduction” from gross salary income, which was being allowed up to financial year 2004-05 is not allowable from financial year 2005-06 onwards.