Think of Section 16 as the government's automatic discount on your salary income — three deductions you get before tax is even computed, without submitting any investment proof for the first one.
Standard Deduction [Section 16(ia)] is the star of the show. Every salaried employee (and pensioner) gets a flat ₹50,000 knocked off their gross salary. No receipts, no bills, no conditions. It replaced the old transport allowance + medical reimbursement system. If your total salary for the year is less than ₹50,000 — say you joined in March — the deduction is capped at actual salary. But for 99% of employees, it's simply ₹50,000, full stop.
Entertainment Allowance Deduction [Section 16(ii)] is for Government employees only — central or state. Private sector employees get nothing here, even if their employer pays them an entertainment allowance. The deduction is the lowest of three amounts: (a) actual entertainment allowance received, (b) one-fifth of basic salary (strictly basic — no allowances, no perquisites included), or (c) ₹5,000. Critical exam point: entertainment allowance is first included in gross salary under Section 17, and then this deduction is subtracted. It's a two-step move, not a full exemption.
Professional Tax [Section 16(iii)] is the simplest. If your state deducts Professional Tax (called Employment Tax in the Constitution) from your salary — Maharashtra levies ₹2,500 p.a., Karnataka has slabs up to ₹2,400 — the entire amount paid is deductible. No upper cap under the Income Tax Act. Whatever is actually deducted from your salary gets full relief here.
These three deductions together reduce your gross salary to Net Salary, which is the final figure that flows into your total income computation. Section 16 features in almost every salary computation problem — whether it's a 4-mark standalone or part of a 10-mark full computation. Nail this, and you'll never drop marks on the deduction rows.