What is Section 80-JJAA ?
This is a new section in respect of deduction of additional employee cost of additional employees. It is applicable from the Assessment Year 2017-18. In this blog, we will go through the conditions, amount of deduction and practical examples etc
First of all let’s understand some important terms related to this section
What is meaning of additional employees as per section 80-JJAA:
It means an employee who has been employed during the previous year but does not include the following:
- Employees whose total salary is more than Rs. 25,000/- per month.
- Employees who were employed for less than 240 days in the previous year (150 days in case of manufacture of apparel or footwear or leather products)
- Employees who do not participate in Recognised Provident Fund like casual workers etc.
- Employees whose entire contribution is paid by the Government, under the Employees’ Pension scheme
Moving further, now we will understand what is the meaning of Additional Employees Cost
What is the additional employees cost as per section 80-JJAA?
Additional Employee Cost means total emoluments paid or payable to additional employees.
However, in the case of existing business, additional employees cost shall be NIL if :
- AThere is no increase in the Total no. of employees which means total no of employees joined during the previous year is equal to total no. of employees left during the previous year.
Particular No. of Employees Total No. of employees as on 01 April, 2019 100 No. of employees joined during the year 20 No. of employees left during the year 20 Total No. of employees as on 31 March, 2020 100
In the above example, there is no increase in Total no. of employees hence not eligible to claim deduction in this case.
In the above example, if no. of employees joined were 30, then in that case deduction of employee cost for additional 10 employees will be available.
- Emoluments are paid otherwise than by A/c payee cheque or account payee draft or any prescribed electronic mode ( like RTGS, NEFT etc)
Example: A ltd incorporated on 01 April, 2019 and employed 20 employees. Total emoluments paid during the year is amounting Rs. 10 Lakhs which is paid in cash.
In the above case, deduction u/s 80-JJAA is available even if emoluments are paid in cash because A Ltd is a new entity.
What is the meaning of emoluments given in section 80-JJAA?
Emoluments means 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;
- (b) Any lump-sum payment paid or payable to an employee at the time of
- Termination of his service or
- Superannuation or
- Voluntary retirement
Example : Gratuity, severance pay,voluntary retrenchment benefits, leave encashment ,commutation of pension etc
What are the conditions to claim deduction u/s 80-JJAA ?
To claim the deduction under this section, following conditions needs to be satisfied :
- The assessee must having Income from the Business Head and he is liable to get his accounts audited as per the requirement of section 44AB along with report of a CA in Form 10DA.
- It should be a new business. It should not be formed by splitting up or reconstruction of an existing business.
- Business is not acquired by way of transfer from any other person.
- Deduction should be claimed in the income tax return.
What are some important points of Form 10DA ?
Form 10DA is a mandatory form to be filed while claiming deduction under section 80-JJAA. Given below are some important points related to Form 10DA :
- Due date of filing Form 10DA is as applicable to assessee for return filing u/s 139(1)
- Form 10DA is submitted online on income tax website.
- DSC is mandatory for filing Form 10DA but not with the help of EVC.
What is the amount of deduction available under section 80-JJAA ?
If the assessee satisfy all the conditions then he is eligible to claim deduction as given below30% of additional employee cost for 3 consecutive years
Example of section 80-JJAA
ABC Ltd., an existing company appoints following employees during the F.Y. 2018-19
|Case||No. of employees||Date of appointment||Salary (in Rs. per person per month)|
Calculation of amount of deduction
|Case||Total salary (Rs.)||Amount of deduction|
|Case 1||27,50,000||(30% of 27,50,000) 8,25,000|
- Case 1 : In this case, assessee is eligible to claim the deduction since additional employees were employed for more than 240 days and salary is not more than Rs. 25,000/-
- Case 2 : In this case, the assessee is not eligible to claim the deduction since amount of salary is more than Rs. 25,000/- p.m.
- Case 3 : In this case, the assessee is not eligible to claim the deduction since no. of days employed are less than 240 days.
Example of section 80-JJAA
ABC Ltd appointed total no. of additional employees during F.Y. 2018-19 is 50. Given below are additional information :
|No. of Employees||Salary||No. of days employed||Participation in RPF||Mode of payment|
|25||20,000 /-||Out of 25, 2 were employed for less than 240 days||5 employees do not participate in RPF||Through Electronic mode|
|25||30,000 /-||Out of 25, 5 were employed for less than 240 days||2 employees do not participate in RPF||Out of 25, salary to 2 employees paid in cash|
First of all let’s calculate no. of eligible additional employees
|Particular||No. of Employees|
|Total no. of employees||50|
|Less:- Employees whose emoluments are more than Rs. 25,000/-||25|
|Less:- Employees who do not participate in RPF (out of those whose salary is Rs. 20,000/-)||5|
|Less:- Employees who employed less than 240 days (out of those whose salary is Rs. 20,000/-)
|No. of eligible additional employees||18|
|Case||No. of employees eligible||Total salary (Rs.) to eligible employees||Amount of deduction|
|Case 1||(25-2-5) = 18**||43,20,000||(30% of 43,20,000) 12,96,000|
** as calculated above
- Case 1 : In this case, salary is not more than Rs. 25,000/-. However, additional no. of employees will not include the employees who did not participate in RPF and who were employed for less than 240 days.
- Case 2 : In this case, salary is more than Rs. 25,000/- hence not eligible to claim deduction.
Frequently Asked Questions
Q- In case of belated return, can we claim this deduction.
Ans. Unlike section 80-IA, 80-IB, deduction u/s 80JJAA can be claimed in case of belated return.
Q- Whether the deduction under section 80-JJAA is in addition to deduction u/s 37(1)
Ans. Yes, deduction u/s 80-JJAA is in excess of deduction u/s 37(1). Hence, total deduction of additional employee salary expense come to 130%
Q- ABC appoints 10 additional employees out of which 3 employees do not participate in Recognised Provident Fund. Whether ABC is eligible to claim deduction of All Employees | No Employees | 7 Employees
Ans. ABC can claim deduction in respect of 7 employees, as 3 do not participate in Recognised Provident Fund.
Q- For how many years, we can claim deduction under this section.
Ans. Deduction under this section can be claimed for 3 consecutive years.
Q- Is deduction u/s 80-JJAA specific with any state or area ?
Ans. This deduction is not area specific deduction. This deduction is available to all assessee provided all conditions specified in this section is satisfied.
Q- Which components of salary are included in the term “Emoluments” used in this section?
Ans. Any sum paid or payable to employees by whatever name is included in Emoluments but does not include the following :
- Employer’s Contribution to statutory funds
- Lump sum payment at the time of termination or voluntary retirement such as gratuity, leave encashment etc
Q- Is there any maximum limit or threshold limit upto which deduction can be claimed under section 80-JJAA ?
Ans. The deduction under section 80-JJAA is 30% of additional employees cost.There is no threshold as such given in the section.
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