Income Tax Form 34: Report for Additional Employee Cost Deduction (Section 146)

Form No. 34 under the Income-tax Rules, 2026 is a mandatory report for audited assessees claiming deduction under Section 146 of the Income-tax Act, 2025 for additional employee cost. It replaces Form 10DA and must be filed along with the return of income and audit report. The deduction allows 30% of additional employee cost for three consecutive tax years, subject to specified conditions. Eligible assessees include businesses or professionals liable for audit, where payments to employees are made through prescribed banking channels. An “additional employee” is one who increases the total workforce compared to the previous year, but exclusions apply based on salary limits, duration of employment, and provident fund participation. The form captures employee count, emoluments, and deduction computation, and must be certified by a Chartered Accountant. Accurate filing is essential, as deduction eligibility depends entirely on the details furnished in Form 34.

FAQ’s pertaining to Income Tax Form No. 34: Report for deduction in respect of additional employee cost under section 146 of Income Tax Act, 2025

Q1. What is Form 34?

Ans. Form 34 is required to be filed along with the Return of Income by audited assessees availing deduction u/s 146 on additional employee cost incurred. Form 34 is to be filed under Rule 68 of the Income tax Rules. The form should be verified by a Chartered Accountant. The deduction that can be availed under this section is 30% of additional employee cost incurred, for 3 tax years.

Q2. Who should file Form 34?

Ans. An assessee earning income from business or profession and liable to be audited u/s 44AB, availing deduction u/s 146 on additional employee cost should file this form. The payment to said employees should be made via an account payee cheque/bank draft or by use of electronic clearing system through a bank account or via electronic mode as specified in Rule 6ABBA.

Q3. What is the Due Date to file Form 34?

Ans. Form 34 is required to be filed along with the Audit report u/s 63 of the Income-tax Act, 2025. Hence, the due date for filing audit report will be the due date to file this form.

Q4. Who is an additional employee, the emoluments of whom are eligible for deduction?

Ans. An additional employee is an employee who is employed during the tax year and whose employment increases the total number of employees employed as on the last day of the preceding tax year. However, under the following conditions, the employee will not be treated as an additional employee for claim of deduction:

– If the total emoluments of the employee exceed Rs. 25000 per month.

– If the Government pays the entire contribution under the Employees’ Pension Scheme.

– If the employee does not participate in a Recognised Provident Fund.

– If the employee is employed for less than 150 days during the tax year where the assessee is engaged in the business of apparel, footwear or leather manufacturing.

– If the employee is employed for less than 250 days during the tax year in the case of other assessees.

However, if the employees are employed for the said number of days (150 or 200) in the immediately succeeding tax year for the respective business, they shall be deemed as additional employees for that tax year.

Q5. What do emoluments to additional employees include?

Ans. Emoluments mean any sum paid or payable to an employee for his employment. However, it does not include employer contributions paid or payable to any pension or provident fund or any other fund and lump sum payments paid or payable to an employee at the time of termination of his service.

Q6. What is the deduction allowed on additional employee cost?

Ans. A deduction of an amount equal to 30% of additional employee cost incurred in the course of business in the tax year shall be allowed for three consecutive tax years, beginning from the tax year in which the employment is provided.

Q7. Why is Form 34 important?

The deduction on emoluments paid to additional employees u/s 146 is allowed based on details filed in Form 34.

Guidance Note pertaining to Income Tax Form No. 34: Report for deduction in respect of additional employee cost under section 146 of Income Tax Act, 2025

Purpose:

Form 34 is required to be filed along with the Return of Income by audited assessees availing deduction u/s 146 on additional employee cost incurred. Form 34 is to be filed under Rule 68 of the Income tax Rules. The form should be verified by a Chartered Accountant. The deduction that can be availed under this section is 30% of additional employee cost incurred, for 3 tax years.

Who should file:

An assessee earning income from business or profession and liable to be audited u/s 44AB, availing deduction u/s 146 on additional employee cost should file this form. The payment to said employees should be made via an account payee cheque/bank draft or by use of electronic clearing system through a bank account or via electronic mode as specified in Rule 6ABBA.

Due Date:

Form 34 is required to be filed along with the Audit report u/s 63 of the Income-tax Act, 2025. Hence, the due date for filing audit report will be the due date to file this form.

Structure of Form 34:

– Basic details – Name, PAN, Tax Year

– Details of additional employees – Number of employees as on the last day of the immediately preceding tax year, Number of employees employed during the tax year,

Number of additional employees whose emoluments are eligible for deduction.

– Details of the emoluments paid to employees – Amount paid to additional employees employed during the tax year and immediately preceding tax year.

– Details of deduction – Amount eligible for deduction in the tax year and preceding two tax years.

What are the documents/information required to file Form 34?

The following documents/information are required to file form 34:

1. Details of additional employees

2. Details of emoluments paid

3. Calculation of deduction as per the provisions of section 146 of the Income-tax Act 2025.

What is the process flow of filing Form 34?
The process flow includes the following steps:

1. Enter details of additional employees

2. Enter details of emoluments paid to additional employees

3. Enter verification details

4. e-verify the Form 34 using DSC of Chartered Accountant

Outcome of processed Form 34:

The deduction on emoluments paid to additional employees u/s 146 is allowed based on details filed in Form 34.

Common changes made across forms:

1. Pre-filling of basic details such as Name, PAN and Tax Year etc. with option for the assessee to edit the same.

2. Assessment / Financial / Previous year or years have been replaced with Tax year or years, wherever appearing in the Form/Annexure.

3. Sections, Clauses and Schedules changed as per the Income-tax Act, 2025.

4. Currency symbol “Rs.” has been replaced with “₹”.