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A taxpayer is eligible for deduction up to 30% of Additional Employee Cost for three consecutive assessment years, starting from the relevant previous year in which a new employee was employed.

What is this?

It is Employee linked tax deduction under chapter VI-A. The more employees you recruit, the more deductions you will get. This deduction is available u/s 80JJAA from A.Y 2017-18.

Who is Eligible to claim deduction u/s 80JJAA?

  • Every Assessee
  • Who is engaged in the business &
  • Liable to tax audit u/s 44AB
Benefits under the Income Tax Act for creation of employment

But Ineligible,

  • If the business is formed by splitting up, or the reconstruction of an existing business
  • In case of acquisition or reorganization of the business

How much deduction is available u/s 80JJAA?

A taxpayer is eligible for deduction up to 30% of Additional Employee Cost Incurred during the previous year for the three consecutive assessment years.

What is Additional Employee Cost?

Total Emoluments paid or payable to additional employees during the previous year.

Who are Additional Employees?

Below employees can be considered as an additional employee:

  • Employed during the previous year
  • Resulting in Net Increase in the total number of employees
  • Total Emoluments ≤ 25K
  • No. of working days ≥ 240 days (150 days in case of apparel manufacturers)
  • Shall participate in the recognized provident fund
  • Entire contribution under employees pension scheme shall not be contributed by government

What are the Emoluments?

All Sums paid or payable to the additional employee in relation to employment

(MINUS)

Statutory Contributions +  Any Payment for termination, superannuation, voluntary retrenchment.

What are the cases where a deduction is not allowed?

  • If the emoluments paid through cash
  • If there is no increase in Net employees during the previous year
 

Whether any certification is required by Chartered Accountant for availing the deduction?

Yes.

Report in Form No. 10DA is required to be obtained from a chartered accountant.

 
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Category Income Tax, Other Articles by - Ajay Kumar Maggidi 



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