Section 80JJAA: Deduction For Employment of New Employees

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

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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

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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 :

• A. There 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. Example :

  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 subject to the fulfillment of other conditions.

• B. Emoluments are paid otherwise than by A/c payee cheque or account payee draft or any prescribed electronic mode ( like RTGS, NEFT etc).

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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

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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 a 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 or as a result of any business reorganisation.
• Deduction should be claimed in the income tax return.

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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) as it is to be furnished along with the return of income.
• Form 10DA is submitted online on income tax website.
• DSC is mandatory for filing Form 10DA but not with the help of EVC.

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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 below

30% 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. 2019-20

Case	No. of employees	Date of appointment	Salary (in Rs. per person per month)
1	10	30-April-2019	25,000
2	15	01-June-2019	28,000
3	20	01-March-2020	24,500

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 2	42,00,000	Nil
Case 3	4,90,000	Nil
Total deduction		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.

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Example of section 80-JJAA

ABC Ltd appointed total no. of additional employees during F.Y. 2019-20 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

Calculation of deduction

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/-)	2
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
Case 2	Nil	Nil	Nil
Total deduction			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.

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