The Income Tax Act vide Section 80JJAA under Chapter VI-A, has provided special deduction for employment of additional employees by assessee. It will be interesting to under that under what circumstances and how much can be the benefit available under this section. We have summarised this special beneficial clause in the following FAQ format:
- Who is eligible to claim the
Any assessee who is required to get its accounts audited under section 44AB of The Income Tax Act ie. Tax audit. Tax audit is primarily applicable to Companies whose total sales, or gross receipts in the business exceed Rs. 1 crore. For professionals, the tax audit is applicable if their gross receipts in the profession exceed Rs. 50 Lakhs.
- What is the
The eligible assessee will be entitle to claim an additional deduction of an amount equal to 30% of the additional employee cost incurred in the previous year. The deduction can be claimed for the relevant assessment year and two more assessment years.
- What is the meaning of
Additional employee means an employee who has been employed during the 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 year over the last year.
- What is the meaning of
"Additional Employee Cost"?
Additional employee cost means the total emoluments paid or payable to additional employee employed during the year.
- What are the conditions to
To avail this benefit, following conditions will need to be satisfied:
- The business should not be formed by splitting up or reconstruction of an existing business;
- The business should not be acquired by transfer from other person or as a result of any business reorganisation;
- There must be increase in number of employees from the total number of employees employed in the last year;
- All the emoluments are paid by account payee cheque or bank draft or any other electronic mode;
- The total monthly emolument of these additional employees are Rs. 25,000/- or less;
- Entire contribution under Employees' Pension Scheme should not be paid by Government;
- The additional employee should participate in the recognised provident fund;
- The employee should be employed for at least 240 days during the previous year. In case of businesses engaged in manufacturing of apparel or footwear or leather products, the 240 days should be read as 150 days.
- The Company must obtain a report from a Chartered Accountant in Form 10DA certifying all the information and details as mentioned in that form. This report needs to be furnished along with the Tax Return of the Company.
- For a new business, total emoluments paid to employees employed during the year shall be deemed to be the additional employee cost. Accordingly, full amount of emolument will be eligible for benefit of additional deduction of 30% under this section.
- In case where an employee is employed for a period of less than 240/180 days, as the case may be, during the previous year, but he is employed for a period of 240/180 days in the subsequent year, he shall be deemed to have been employed in the subsequent year. Accordingly, the benefit of this additional deduction shall be available in the subsequent year/s.
- The total emolument does not include any contribution paid or payable by employer to any pension fund or provident fund or any other fund;
- The total emolument does not include any lumpsum payment to employee at the time of termination of his service or superannuation or gratuity, severance pay, leave encashment, retirement benefits etc.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.