Statutory position — s.80JJAA: thirty per cent of additional employee cost for three years, and every condition that defeats it
CBDT Circulars & InstructionsCuts both ways
My client wants to claim s.80JJAA for new hires. What exactly is the deduction, and which conditions actually cause claims to fail?
Section 80JJAA gives an assessee to whom s.44AB applies, whose gross total income includes profits and gains derived from business, a deduction of thirty per cent of the additional employee cost incurred in the course of that business in the previous year, for three assessment years including the assessment year relevant to the previous year in which the employment is provided. The conditions that defeat claims in practice are in the Explanation, not in the operative sub-section: an employee earning more than twenty-five thousand rupees a month is not an "additional employee", nor is one employed for less than two hundred and forty days in the previous year (one hundred and fifty days for a manufacturer of apparel, footwear or leather products), nor one who does not participate in a recognised provident fund, nor one whose entire Employees' Pension Scheme contribution is paid by the Government. And the additional employee cost is nil for an existing business if there is no increase in the total number of employees over the last day of the preceding year, or if the emoluments are paid otherwise than by account payee cheque, account payee bank draft, electronic clearing system through a bank account, or such other prescribed electronic mode.