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Meaning, conditions, tax benefit, understanding form 10DA etc for FY 2020-21 (AY 2021-22) & FY 2019-20 (AY 2020-21)
Problem of unemployment is not a small problem for any country. This section was introduced to generate more employment and to encourage people. Let’s have a look at this blog and you can plan the recruitment process to claim a huge amount of deduction of additional employee cost.
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
It means an employee who has been employed during the previous year but does not include the following:
Moving further, now we will understand what is the meaning of Additional Employees Cost
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 :
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.
Emoluments means any sum paid or payable to an employee in lieu of his employment by whatever name called, but does not include—
Example : Gratuity, severance pay,voluntary retrenchment benefits, leave encashment ,commutation of pension etc
To claim the deduction under this section, following conditions needs to be satisfied :
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 :
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 yearsABC 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 |
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 |
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
Unlike section 80-IA, 80-IB, deduction u/s 80JJAA can be claimed in case of belated return .
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%
ABC can claim deduction in respect of 7 employees subject to other conditions, as 3 do not participate in Recognised Provident Fund.
Deduction under this section can be claimed for 3 consecutive years.
This deduction is not area specific deduction. This deduction is available to all assessee provided all conditions specified in this section is satisfied.
Any sum paid or payable to employees by whatever name is included in Emoluments but does not include the following :
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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