SECTION 80JJAA

The  Income Tax Act provides several tax reliefs to reduce the taxable income of individuals and companies. One of such  deduction is made under Section 80JJA of the Income Tax Act and is commonly known as 80JJAA deduction.

Section 80 JJAA of the Income Tax Act is a significant provision that aims to promote employment generation and incentivize businesses to provide job opportunities. This section offers various benefits and deductions to eligible taxpayers, encouraging them to invest in human capital and contribute to the growth of the economy. In this article,we will provide an overview of Section 80 JJAA, discuss its provisions and benefits in detail, and analyze its impact and significance in the broader context of tax laws and economic development.

WHAT IS SECTION 80JJAA OF INCOME TAX ACT?

Section 80 JJAA of the Income Tax Act was introduced with the objective of promoting employment opportunities and reducing the unemployment rate in the country.  Under this section, eligible employers are provided with certain deductions and benefits for hiring new employees. These benefits not only incentivize businesses to create job opportunities but also help in reducing the burden of taxes on employers. It allows employers to claim a deduction of up to 190% of additional employee costs incurred while employing new eligible employees.

Applicability of Section 80JJAA of the Income Tax Act

Section 80JJA of the Income Tax Act deals with tax deductions on profits and gains from businesses. The section allows a deduction of 30% on additional employee costs for three consecutive assessment years.

Review the following conditions that must be met to claim the Section 80JJAA tax deduction:

1. The taxpayer  must file the ITR and submit the Chartered Accountant  report in Form 10DA by the deadline.
2. The business should not have been formed  as a result of re-establishment, reconstruction or revival by the assessee of the business in the circumstance.
3. The business should not created by spinning off or reorganizing another existing business. However, you can claim this deduction if you start, revitalize or remodel a business.

Deductions under Section 80JJAA

The deduction available under section 80JJAA of Income Tax Act 1961, is 30% of additional employee cost incurred by the taxpayer.

Who can be considered as an additional employee?

“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 inculde:

1. The employee whose salary is more than Rs 25000 per month.
2. An employee employed for a period of less than 240 days during the previous year.
3.  An employee who does not participate in the recognised provident fund.
4. An employee for whom the entire contribution is paid by the Government under the Employees Pension Scheme.

Meaning of Additional Employee Cost:

The Additional employee cost  refers to the total amount of remuneration paid or payable to new staff in the previous year. The law states that, for existing companies, the additional costs will be zero if the following conditions are met:

The number of employees has not increased compared to the total number of employees on the last day of the previous year.

Emoluments may be paid by methods other than payee’s check or money order, or by bank account using ECS.

Final Word

It is important to note that deduction under Section 80JJAA is not available for businesses engaged in the service sector. If you are running a production-based business that meets the mentioned criteria, you can apply for the 80JJAA deductions. Go through the parameters carefully to avoid any mistakes related to the deduction claims.