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Compliance Calendar for the month of July, 2023 Simplifying Export Procedures: Tax-Free Supplies for International Trade

Section 80 JJAA is applicable from AY 2017-18. This section allows deduction in respect of additional employment cost of new employees under Chapter VI-A of the Income Tax Act. The deduction can be claimed by assessee who have started a new firm, hired new employees and whose tax returns need to be audited.

Eligibility for claiming the deduction available to assessee: –

  • The entity should have income include profit and gains derived from business.
  • The entity should be eligible for tax audit under section 44AB
  • The business entity should file Form-10DA with its return of income.
  • The business should be new, and not formed by splitting up or reconstruction of an already existing business.

Section 80 JJA was amended w.e.f. 01.04.2017. Under this section, a deduction is allowed for 30% of additional employee cost incurred. Under this section, any sum paid or payable to employees is considered as ’emoluments’. However, the employer ‘s contribution to statutory funds and lump sum payment at the time of termination or voluntary retirement such as gratuity, leave encashment etc.

There are certain conditions for category of employees covered under   this section-

  • The salary of the employees should be less than Rs.25000 p.m.
  • The employee should be participating in a recognized provident fund.
  • The service period of the employee should not be less than 240 days during the previous year.
  • Any employee for whom the entire contribution under any employee pension scheme is paid by government will not be considered for the purpose of calculating additional employees.

The assessee is required to submit a report in Form 10DA. Such report shall be signed by a practicing Chartered Accountant and required to be furnished along with the income tax return of assessee for claiming deduction under Section 80JJAA.

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