Deduction in respect of employment of new employees - Section 80JJAA - Income Tax - Ready Reckoner - Income Tax

Deduction in respect of employment of new employees - Section 80JJAA Read with Rule 19AB Section 80JJAA deduction of the Income Tax Act can be claimed by all assessees for employment generation. Section 80JJAA deduction is aimed at generating employment in all sectors. 1. Eligible Assessee Where the gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from business 2. Quantum of Deduction 30% of the additional employee cost incurred Additional employee cost means : i. In case of a new business emoluments paid or payable to employees employed during that previous year shall be deemed to be the additional employee cost ii. In case of an existing business the additional employee cost shall be nil, if there is no increase in the number of employees as on the last day of the preceding year and emoluments are paid otherwise than by an account payee cheque or bank draft 3. Period of Deduction Deduction is available for 3 AY s starting from the year in which the employment is provided. 4. Conditions for Deduction i. Business is not formed by splitting up, or the reconstruction , of an existing business ii. The business is not acquired by the assessee by way of transfer from any other person or as a result of any business re-organisation iii. assessee furnishes a Form 10DA along with the return of income 5. Meaning of Additional employee 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 and does not include: employee whose total emoluments are more than 25,000/- per month employee on whom Employee Pension Scheme is applicable employee who does not participate in the recognised provident fund employee employed for a period of less than 240 days during the previous year Provided that in case the assessee is engaged in the business of manufacturing of apparel or footwear or leather products then employment for 150 days is applied . Where an employee is employed during the previous year for a period of less than 240 days or 150 days , as the case may be, but is employed for a period of 240 days or 150 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. 6. Meaning of Emoluments 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 under any law for the time being in force; 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 , such as gratuity, severance pay, leave encashment, voluntary retrenchment benefits, commutation of pension and the like.