1.Quantum and period of deduction u/s 80JJAA:
Where the gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from business, a deduction of an amount equal to 30% of additional employee cost incurred in the course of such business in the previous year, would be allowed for 3 assessment years including the assessment year relevant to the previous year in which such employment is provided.
2.Conditions to avail deduction u/s 80JJAA:
The deduction would be allowed only subject to fulfilment of the following conditions:
- The business should not be formed by splitting up, or the reconstruction, of an existing business.
- The business is not acquired by the assessee by way of transfer from any other person or as a result of any business reorganisation.
- The report of the accountant, giving the prescribed particulars, has to be furnished along with ROI.
3.Meaning of terms u/s 80JJAA:
Additional employee cost:
Total emoluments paid or payable to additional employees employed during the previous year.
- In the case of an existing business:
The additional employee cost shall be Nil, if
- 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;
- 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 or through any other prescribed electronic mode.
- In the first year of a new business
- The emoluments paid or payable to employees employed during that previous year shall be deemed to be the additional employee cost.
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.
Exclusions from the definition:
- An employee whose total emoluments are more than Rs.25,000 per month; or
- 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; or
- An employee employed for a period of less than 240 days during the previous year. In case of an assessee engaged in the business of manufacturing of apparel or footwear or leather products, an employee employed for a period of less than 150 days during the previous year; or
- An employee who does not participate in the recognised provident fund.
If an employee is employed during the previous year for less than 240 days or 150 days, as the case may be, but is employed for a period of 240 days or 150 days, as the case may be, in the immediately succeeding year, he shall be deemed to have been employed in the succeeding year. Accordingly, the employer would be entitled to deduction of 30% of additional employee cost of such employees in the succeeding year.
Any sum paid or payable to an employee in lieu of his employment by whatever name called.
Exclusions from the definition:
- 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
- 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.
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