Deduction in Respect of Employment of New Employees [Section 80JJAA]
• Any assessee with profits from business and liable for tax audit can claim this deduction. The deduction is linked to hiring additional employees.
• Deduction equals 30% of the additional employee cost in each of the 3 years starting from the assessment year relevant to the year of additional employment.
• Additional employee cost refers to the total emoluments paid or payable to additional employees hired during the year.
• For new business, emoluments in the first year are deemed additional costs. However, for existing businesses, the additional cost is nil if there is no increase in employee numbers compared to the previous year’s end or if the payment mode is other than an account payee cheque or bank draft, or by use of electronic clearing systems through a bank account or specified electronic modes.
• ‘Additional Employee‘ means an employee who has been employed by the assessee during the previous year and whose employment has the effect of increasing the total number of employees employed by the assessee as on the last day of the preceding year, but does not include:
An employee whose total emoluments exceed Rs. 25,000 per month;
An employee for whom the entire contribution is paid by the Government under the Employees’ Pension Scheme [Notified under the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 vide Notification No. GSR 748(E), dated 16-11-1995];
An employee who does not participate in the recognised provident fund;
An employee employed for a period of less than 240 days. In the case of an assessee engaged in the business of manufacturing of apparel, footwear or leather products, this period is 150 days.
Where an employee is employed during the previous year for a period of less than 240/150 days, but is employed for a period of 240/150 days in the immediately succeeding year, he shall be deemed to have been employed in the succeeding year.
• ‘Emoluments’ means any sum paid or payable to an employee in lieu of his employment. However, it does not include the following:
Employer’s contribution to the pension fund, provident fund or any other fund for the benefit of the employee under any law;
Lump-sum payment paid or payable at the time of termination of service or superannuation or voluntary retirement, such as gratuity, severance pay, leave encashment, voluntary retrenchment benefits, commutation of pension, etc.
• Conditions for claiming deduction –
Business not formed by splitting/reconstruction except as per Section 33B.
Business not acquired via transfer or reorganization.
Assessee must furnish the accountant’s report electronically in Form 10DA at least one month before the due date for return filing.