Section 80JJAA: Deduction in respect of employment of new employees

Section 80JJAA: Deduction in respect of employment of new employees
(1) Where the gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from business, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional employee cost incurred in the course of such business in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided.

(2) No deduction under sub-section (1) shall be allowed,—
(a) if the business is formed by splitting up, or the
reconstruction, of an existing business:
Provided that nothing contained in this clause shall apply in
respect of a business which is formed as a result of re-
establishment, reconstruction or revival by the assessee of
the business in the circumstances and within the period
specified in section 33B;

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

(c) unless the assessee furnishes alongwith the return of
income the report of the accountant, as defined in the
Explanation to section 288 giving such particulars in the
report as may be prescribed.

Explanation.—For the purposes of this section,—

(i) “additional employee cost” means the total emoluments paid or payable to additional employees employed during the previous year:
Provided that in the case of an existing business, the additional employee cost shall be nil, if—

(a) there is no increase in the number of employees from the
total number of employees employed as on the last day of the
preceding year;

(b) emoluments are paid otherwise than by an account payee
cheque or account payee bank draft or by use of electronic
clearing system through a bank account:
Provided further that in the first year of a new business,
emoluments paid or payable to employees employed during
that previous year shall be deemed to be the additional
employee cost;

(ii) “additional employee” means an employee who has been employed during the previous year and whose employment has the effect of increasing the total number of employees employed by the employer as on the last day of the preceding year, but does not include—

(a) an employee whose total emoluments are more than
twenty-five thousand rupees 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 two
hundred and forty days during the previous year; or

(d) an employee who does not participate in the recognised
provident fund:
[Provided that in the case of an assessee who is engaged in
the business of manufacturing of apparel, the provisions of
sub-clause () shall have effect as if for the words “two
hundred and forty days”, the words “one hundred and fifty
days” had been substituted;]

(iii) “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; and

(b) 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 and the like.

(3) The provisions of this section, as they stood immediately prior to their amendment by the Finance Act, 2016, shall apply to an assessee eligible to claim any deduction for any assessment year commencing on or before the 1st day of April, 2016.]
Rule 19AB Form of report for claiming deduction under section 80JJAA. Report of an accountant which is required to be furnished by the assessee along with the return of income under clause (c) of sub-section (2) of section 80JJAA shall be in Form No. 10DA.”

Notes:
1.* “additional employee” means an employee who has been employed during the previous year and whose employment has the effect of increasing the total number of employees employed by the employer as on the last day of the preceding year, but does not include, –
(a) an employee whose total emoluments are more than twenty-five thousand rupees 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 two hundred and forty days (one hundred and fifty days in case of an assessee engaged in the business of manufacturing of apparel) during the previous year; or
(d) an employee who does not participate in the recognized provident fund;
2.** “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; and
(b) 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 and the like”
3. # the amount shall be nil if the emoluments are paid otherwise than by an account payee cheque or account payee bank draft or by way of a electronic clearing system through a bank account.”

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