Section
16(i)
This sub
section provided standard deduction for employed people (like the standard
deduction we see now in case of rent). However with passage of time as basic exemption
limit was increased it was decided to do away with this benefit. It was increasing
the exemption on one hand and taking away some deduction on the other so that net effect is neutralised.
Section
16(ii)
Entertainment
allowance is given to employee for hospitalisation/refreshment costs he incurs
in dealing with customer/potential customers of employers.
Some
deductions were categorically kept for Govt employee ( like 80CCD for Central
Govt Employee only) so that some Govt employment remained attractive over private
employment. However with passage of time and magnitude of this deduction it has
become irrelevant now. It
There
is a need of putting a limit of 1/5th or Rs 5000 as in absence of
any limit employer may tend to give the entire salary as entertainment
allowance only and employee may get away with deduction of same. Actual
expenditure incurred by employee is not relevant as the proofs of expense are neither
required to be preserved nor can be sought by ITD.
Section
16(iii)
Under
Clause (2) article 276 of the Constitution a State Govt. cannot impose more
than Rs.2,500 per annum as professional tax. The limits was Rs 250 earlier and
was raised to Rs 2,500 in 1988. State Govt are still insisting to raise the
limits to Rs 7.500. The logic was to get some revenue to state govt of it
provides infrastructure for employment/trade like VAT applied by respective
state govts. However the logic does not appear very valid for taxing someone for
working but as it legal under constitution of India therefore following 8
states are levying the same also.
1) Maharashtra.
2)
New Delhi
3)
Karnataka
4)
West
Bengal
5)
Madhya
Pardesh
6)
Tamil
Nadu
7)
Andhra
Pardesh
8) Gujarat
The rate
of tax is based on monthly salary of the individual.
