The government introduced Section 80JJAA of the Income Tax Act to provide relief to entities for the expenses incurred due to recruiting additional employees. Under this Section, employers of new and old companies can claim a deduction for the extra employee cost. Keep reading to know more about this Section, eligibility criteria and how to claim a deduction.
Since it was introduced, the deduction has gone through various changes. The last amendment was made, and the Section was applicable w.e.f April 4 2017. Under it, employers of new or existing entities can claim 30% of their expenses incurred for recruiting an additional employee as tax deduction.
The objective of Section 80JJAA is to encourage entities to make recruits and add fresh employees at regular intervals. Thus, it creates employment in every sector.
The eligibility criteria to claim deduction under Section 80JJAA are as follows:
Also Read: Section 80CCC Of The Income Tax Act
There are these exceptions too that individuals need to know of:
For claiming deduction under Section 80JJAA, entities must identify their additional employees. They are individuals whose recruitment during the previous year has increased the total number of employees on the last date of that year. However, there are exclusions like the following:
Additional employee cost involves their total emolument, which is either paid or payable during the previous year by the company’s employer. However, the 80JJAA deduction will be considered nil in these cases:
Emoluments refer to the sum paid by an employer to their employee in lieu of their service. However, there are certain exceptions in consideration.
One must keep in mind these points to claim tax deduction u/s 80JJAA of the Income Tax Act:
To claim deduction under Section 80JJAA, one needs to fill up form 10DA. However, remember it must have a signature of a Chartered Accountant in practice. Also, one must submit it electronically to the Income Tax Department.
The process of filing the form is given below:
Step 1: First, log in to the Income Tax Department e-filing portal.
Step 2: On the upper left side of their website, locate an e-file menu and click on Income Tax Forms under the drop-down list.
Step 3: Proceed with ‘Prepare and Submit Online Form (other than ITR).’
Step 4: Next, select the Assessment year and click on Form 10DA.
Step 5: Finally, after filling up the form tap on the ‘Continue’ option.
If you think you satisfy the above criteria and do not fall under any exceptions, then avail for the deduction under Section 80JJAA of the Income Tax Act. Also, make sure you do not forget to file Form 10DA to claim deductions successfully.
1. Is deduction under Section 80JJAA available in addition to deduction under Section 37(1)?
Yes, Section 80JJAA deduction is available in addition to Section 37(1) deduction. So the total percentage of deduction available for expenses incurred due to additional employees is 130%. This means deduction of expenditure (excluding costs covered under Section 30 and Section 36) for carrying on business or profession will be allowed.
2. For how many years can we claim deduction under Section 80JJAA?
Deduction under Section 80JJAA of the Income Tax Act amounting to 30% of the additional employee cost is available for three assessment years. It is only available if employers have recruited them in the previous year. However, their claim will be available as first, second, and third instalments.
3. Is there any maximum or threshold limit up to which individuals can claim deduction under section 80-JJAA?
There is no maximum limit up to which deduction amount can be claimed. However, the department has fixed its percentage at 30% of the employee cost. To claim this amount, you will have to download and fill out Form 10DA, then submit it to the Income Tax Department.
4. How to calculate additional employee cost and deduction u/s 80JJAA?
The additional employee cost is the total emolument paid or payable by an employer in the previous year. After multiplying the emoluments of the additional employees with the total number of additional employees, we can compute the deduction amount under Section 80JJAA.
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
|Section 143 (1a)
What is Form 26QB for TDS? How to Download and Submit it?While purchasing a property, buyers are liable to pay various taxes. The Finance Act, 2013 made TDS... Read More »
PF Withdrawal Rules 2023 – Rules, Documents Required and TypesEPF/PF Withdrawal Employees’ Provident Fund (abbreviated as EPF) is a popular retirement sav... Read More »
Stamp Duty and Property Registration Charges in Delhi 2023It is compulsory for property buyers in the Capital to pay stamp duty in Delhi during property regi... Read More »
Income Tax Return – Documents, Forms and How to File ITR Online AY 2023-24In India, it is mandatory for all taxpayers who earn more than the basic tax exemption limit to fil... Read More »
What is Section 80CCD – Deductions for National Pension Scheme and Atal Pension YojanaThe Income Tax Act provides a number of deductions and tax benefits to taxpayers, so they can strat... Read More »
Tax on Dividend Income: Sources, Tax Rate and TDS on dividend incomeWhat are Dividends? Companies may raise funds for running their operations by selling equity. Th... Read More »
Section 112A of Income Tax Act: Taxation on Long-Term Capital GainsWhat is Section 112A? Section 112A of the Income Tax Act was announced in Budget 2018 to replace... Read More »
Section 206AB of Income Tax Act: Eligibility And TDS RateSection 206AB was introduced in the Finance Bill 2021 as a new provision pertaining to higher deduc... Read More »
What is a Credit Note in GST – Example, Format and StepsA GST Credit Note is mandatory for any GST-registered supplier of goods or services. As a supplier,... Read More »
Exemptions and Deductions Under Section 10 of Income Tax ActWhat Is Section 10 of the Income Tax Act? Section 10 of the Income Tax Act, 1961 provides tax-sa... Read More »
Section 57 of the Income-tax Act – Income from Other SourcesIt is quite likely that many entities - individuals as well as businesses - have multiple sources o... Read More »