Section 80JJAA

Deduction in respect of employment of new employees

1.       Conditions to be fulfilled for claiming the deduction: -

a.       Where the gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from business, subject to the conditions specified

b.       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 shall be allowed: -

a.       if the business is formed by splitting up, or the reconstruction, of an existing business. This condition will not 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 along with the return of income the report of the accountant.

3.       Important definitions in this regard: -

a.       Additional employee cost means 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—

                                                               i.      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;

                                                             ii.      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.

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.

b.       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, -

                                                               i.      an employee whose total emoluments are more than twenty-five thousand rupees per month; or

                                                             ii.      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

                                                           iii.      an employee employed for a period of less than two hundred and forty days during the previous year; or

                                                           iv.      an employee who does not participate in the recognised provident fund;

c.       Emoluments means any sum paid or payable to an employee in lieu of his employment by whatever name called, but does not include –

                                                               i.      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 and

                                                             ii.      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.

4.       KKACA™ assists with:

a.       Identification of the additional employee cost and

b.       Report of the accountant