Who is eligible to claim deduction under section 80JJAA of Income Tax Act 1961

Available to whom – Assessee having income from business and liable for tax audit u/s 44AB.

How much – 30% of additional employee cost incurred during the previous year in course of business & available for 3 assessment years starting from the year in which the employment is provided.

Now What is Additional employee cost  (AEC)= Total Emoluments paid or payable to Additional

Note: In case of Existing Business:  AEC = 0 (NIL), IF-

1. There is no increase in number of Employees from total number of employees employed as on last day of the preceding year, OR

2. Emoluments are paid otherwise than by – Account payee cheque OR – Account payee bank draft OR – ECS through a bank account.

In case of First Year of Business:

AEC = All Emoluments Paid/payable to employees employed during that first year.

(It Means if company incorporated during the year then this deduction is also available)

Now Who is Additional Employee ? 

Additional Employee

Include

An employee who has been employed during the previous year & whose employment has the effect of increasing the total number of employees employed as on the last day of the preceding year

Excludes

(a) an employee whose total emoluments are more than INR 25000 per month; or

(b) an employee for whom the entire contribution is paid by the Government under the Employees’ Pension Scheme notified in accordance with the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952); or

(c) an employee employed for a period of less than 240 days during the previous year [150 days in the case of an assessee who is engaged in the business of manufacturing of apparel or footwear or leather products]; or

(d) an employee who does not participate in the recognized provident fund.

What if Employee employed during the year less than 240 Days ?

Where an employee is employed during the previous year for a period of less than 240 days or 150 days, as the case may be, but is employed for a period of 240 days or 150 days, as the case may be, in the immediately succeeding year, he shall be deemed to have been employed in the succeeding year and the provisions of this section shall apply accordingly

EMOLUMENTS

Include – Any sum paid or payable to an employee in lieu of his employment e.g. salary, bonus etc.

Exclude – 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; and any lump-sum payment paid or payable to an employee at the time of termination of his service or superannuation or voluntary retirement, such as gratuity, severance pay, leave encashment, voluntary retrenchment benefits, commutation of pension etc.

No Deduction

(a) if the business is formed by splitting up, or the reconstruction, of an existing business; or

(b) if the business is acquired by the assessee by way of transfer from any other person or as a result of any business re-organisation; or

(c) unless the assessee furnishes alongwith the return of income the report of the chartered accountant, as defined in the Explanation to section 288 i.e. Form 10DA electronically.