Deduction under section 80JJAA

Section 80JJAA of the Income Tax Act provides a vital avenue for businesses in India to avail tax benefits while fostering employment opportunities and contributing to economic expansion. This guide delves into the intricacies of Section 80JJAA, elucidating eligibility criteria, deduction amounts, and the definition of additional employee costs. By exploring the nuanced provisions of this section, businesses can ensure compliance and leverage the incentives offered for promoting employment. Through this comprehensive understanding, stakeholders can harness the potential of Section 80JJAA to propel both business growth and national economic development.

Who is eligible to claim deduction u/s 80JJAA?

When the gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from business and he has incurred some additional employee cost in the course of such business in the previous year.

How much Deduction is allowed u/s 80JJAA?

30% of additional employee cost for three assessment years including the assessment year relevant to the previous year in which such employment is provided.

What does additional employee cost mean For section 80JJAA?

“Additional employee” cost means the total emoluments paid or payable to additional employees employed during the previous year:

Provided that in the case of an existing business, additional employee cost shall be nil, if-

a) there is no increase in the number of employees from the total number of employees employed as on the last day of the preceding year;

b) emoluments are paid otherwise than by an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed.

Provided further that, in the first year of new business, emoluments paid or payable to employees employed during that previous year shall be deemed to be additional employee cost.

What does additional employee mean For section 80JJAA?

“Additional employee” means an employee who has been employed during the previous year and whose employment has the effect of increasing the total number of employees employed by the employer as on the last day of the preceding year, but does not include—

a) an employee whose total emoluments are more than twenty-five thousand rupees per month; or

b) an employee  for whom the entire contribution is paid by the Government under the Employees’ Pension Scheme ; or

c) an employee employed for a period of less than two hundred and forty days during the previous year. Provided that in the case of an assessee who is engaged in the business of manufacturing of apparel or footwear or leather products, an employee should not be employed for less than one hundred and fifty days ;

Provided further that where an employee is employed during the previous year for a period of less than two hundred and forty days or one hundred and fifty days, as the case may be, but is employed for a period of two hundred and forty days or one hundred and fifty days, as the case may be, in the immediately succeeding year, he shall be deemed to have been employed in the succeeding year and the provisions of this section shall apply accordingly; or,

d) an employee who does not participate in the recognised provident fund.

What does emoluments mean For section 80JJAA?

“Emoluments” means any sum paid or payable to an employee in lieu of his employment by whatever name called, but does not include—

a) any contribution paid or payable by the employer to any pension fund or provident fund or any other fund for the benefit of the employee ; and

b) any lump sum  payment paid or payable to an employee at the time of termination of his service or superannuation or voluntary retirement.

In what cases deduction is not allowed u/s 80JJAA?

a) If the business is formed by splitting or reconstruction of an existing business;

b) If the business is acquired by the assessee by way of transfer from any other person or as a result of any business reorganisation;

c) unless the assessee furnishes the report of the accountant before the specified date giving such particulars in the report as may be prescribed.

What report is to be issued by the accountant for Section 80JJAA deduction?

Form 10DA is the report to be furnished by a practicing Chartered accountant. It certifies the amount of deduction that a taxpayer can claim u/s 80JJAA. It is a mandatory form that taxpayers need to file while claiming Deduction u/s 80JJAA.

Due date of filing Return for  Section 80JJAA deduction?

: Atleast one month before the due date of return filing.

What is the rationale behind introducing section 80JJAA deduction?

To boost employment and promote economic growth.

In conclusion, Deduction u/s 80JJAA serves as a significant incentive for businesses to invest in employment generation, contributing to the overall economic development of the country.