A] DEDUCTIONS:

1) ENTERTAINMENT ALLOWANCE:
For govt. employees only For non govt employees
Whichever is lower Fully taxable
Actual Recd. 1/5th of Basic salary Flat Ded. 5000/-

2) PROFESSIONAL TAX:
Paid by employee Paid by employer
DEDUCTED from GROSS Payment made per month
SALARY INCLUDED in GROSS SALARY
And then DEDUCTED from GROSS SALARY
3) STANDARD DEDUCTION: 50000/-
B] EXEMPTIONS:
1) GRATUITY:

  Exemption
Sr
1 Gratuity Received by Govt & Fully Exempt
Local Authority employees.
2 Gratuity in case of employees Lower of following Exempted,
covered by Payment of  Gratuity a. Actual Gratuity
Act,1972. b. ₹ 20,00,000/-
c. Salary last drawn x 15/26 x no. of years of
  (Here, Salary means,
service
= Basic + DA entire)

3 Gratuity in respect of other Lower of following is exempted,

employees. a. Actual Gratuity
b. ₹ 20,00,000/-
  (Here, Salary means, c. salary last 10 months drawn x 15/30 x
= Basic + DA, if terms of completed yrs. Of service. (only completed yrs.
employment so provide + To be taken)
Commission, if based on fixed% of
turnover.)

Gratuity received during continuation of service is Fully Taxable.

Maximum exemption available under this section during life time of the
assessee cannot exceed ₹ 10,00,000/-
Covered under Gratuity Not Covered under Gratuity Act
Act
15/26 15/30
 Salary= Salary=
Basic+ Basic+
DA DA %+
Commission%
Number of year service Number of year completed service
Last drawn salary Last 10 months average salary
Retired in 1st June 2019 (2*5000+8*4500)/10 = 4600
Basic 5000 for 2 Months
Basic 4500 for 8 Months
2) PENSION:

S Particulars Exemption
r

1 Commuted Pension received Fully Exempt

by Govt employees

2 Commuted Pension received  by

Non-Govt employees :

 If Such employees receive 1/3(Commuted Pension/Commuted %) of

Gratuity TOTAL Pension is exempt.

 If Such employees do not ½  (Commuted Pension/Commuted %)of

receive Gratuity TOTAL Pension is exempt.

3 Uncommuted Pension received  by Fully taxable as Salary.

ALL employees

3) LEAVE ENCASHMENT:
1.RECEIVED BY GOVT EMPLOYEES AT THE FULLY EXEMPT
TIME OF RETIREMENT
2.RECEIVED by Other employees. Lower of following is Exempt:
(Here, Salary means, = Basic + DA, a. Actual Leave Encashment.
if terms of employment so provide b. Maximum ₹ 3,00,000/-
+ c. Avg. Monthly Salary x 10
Commission, if based on fixed d. Avg. Monthly Salary x earned
% of turnover.) leave months.
3. received during continuous of Fully TAXABLE AS SALARY
Service.
4) HRA:

FOR ALL EMPLOYEES 1.Actual rent recd.

[WHICHEVER IS LOWEST] 2. Rent paid – 10 %salary
SALARY = BASIC +DA% +COMMISSION%
3. 40% of salary
[ 50% if house situated at Metro
Cities i.e. Delhi ,Mumbai, 
Kolkata & Chennai )
5) RETRENCHMENT COMPENSATION:
Compensation at the time of Lower of following is Exempt:
retrenchment EXEMT TO THE EXTENT 1.Actual Amount Received.
SALARY = BASIC +DA% +COMMISSION% 2.Maximum Amount ₹ 5,00,000/-
3.15 days average pay for every
completed years of continuous
service or any part in
excess of six months.

PF:
Employee Contribution 
1. Interest credited to PF Account on Employee’s Contribution 

Particulars Recognized PF Unrecognized PF Statutory PF Public PF

Employer’s Amount in  excess of Not taxable Fully exempt N.A. (as there is
Contribution 12% of *salary is yearly only
taxable assessee’s own
contribution)

Employee’s Eligible for Not eligible Eligible for Eligible for

Contribution deduction u/s 80C for deduction u/s deduction u/s 80C
deduction 80C
Interest Amount in  excess of Not taxable Fully exempt Fully exempt
Credited 9.5% p.a. is taxable yearly

*Salary = (Basic Salary + DA % + Commission %)

E’or Contribution to PF Income not taxed earlier Taxable now

Int on E’or Contribution Income not taxed earlier Taxable now
E’ee Contribution to PF Investment  Not Taxable 
Int on E’ee Contribution Income, not taxed earlier Taxable now