Section 80JJAA
5paisa Research Team
Last Updated: 27 Nov, 2024 02:52 PM IST
Want to start your Investment Journey?
Content
- What Is Section 80JJAA Of The Income Tax Act?
- Who Is Eligible To Claim Deductions Under Section 80JJAA?
- Calculations Of Deduction Under Section 80JJAA
- How Much Deduction Can Be Claimed Under Section 80JJAA?
- What Are The Conditions To Be Fulfilled To Claim Deductions Under Section 80JJAA?
- Penalties For Claiming False Deductions Under Section 80JJAA
- Conclusion
Section 80JJAA Income Tax Act is designed to encourage businesses to create more jobs and contribute to industrial growth. It offers tax benefits to eligible companies that increase their workforce aiming to boost employment opportunities and expand business activities.
What Is Section 80JJAA Of The Income Tax Act?
Section 80JJAA Income Tax Act encoufrages businesses to create new jobs in the formal sector by offering tax deductions. This provision allows employers to deduct up to 190% of the additional employee costs incurred when hiring eligible workers. The goal is to reduce unemployment rates by incentivizing businesses to expand their workforce. By claiming this deduction businesses can lower their taxable income thereby promoting economic growth through increased job opportunities. Overall Section 80JJAA Income tax act aims to stimulate employment and boost the formal sector by supporting employers who invest in hiring new employees.
Who Is Eligible To Claim Deductions Under Section 80JJAA?
Deduction under Section 80JJAA Income Tax allows businesses to claim benefits on additional employee costs incurred for hiring new employees meeting certain criteria. Here’s a simplified explanation:
1. Employee Eligibility
• Employees must have a monthly salary of up to Rs. 25,000.
• They should have been employed for more than 240 days in the previous year.
• They must participate in a recognized Provident Fund.
2. Employer/Business Eligibility
• Business must have been operational for at least 240 days in the previous year.
• It must have employed a minimum of 10 employee in the preceding year.
• Business must not have previously availed of a deduction under Section 80JJAA in any prior year.
3. Benefit Calculation
• Businesses can claim a deduction equal to 30% of the additional employee cost incurred in the previous year for hiring eligible employees.
Calculations Of Deduction Under Section 80JJAA
ABC Ltd. incurred ₹70 lakh as total employee cost in the financial year 2021-22 with 40 employees. In the next year 2022-23 their total employee cost increased to ₹95 lakh with 50 employees.
To find out the additional employee cost incurred in 2022-23
Additional Employee Cost = ₹95 lakh (2022-23 total) - ₹70 lakh (2021-22 total)
= ₹25 lakh.
According to Section 80JJA of the Income Tax Act, ABC Ltd. can claim a deduction equal to 30% of this additional employee cost.
Deduction under Section 80JJA = 30% of ₹25 lakh
= ₹7.5 lakh.
ABC Ltd. can claim a deduction of ₹7.5 lakh under Section 80JJA Income Tax for the financial year 2022-23 based on their increased employee costs compared to the previous year.
How Much Deduction Can Be Claimed Under Section 80JJAA?
Section 80JJAA allows a 30% tax deduction for three consecutive assessment years starting from the year in which you provided additional employment. To qualify for this deduction you need to meet the following conditions:
Ownership Requirement
Your business must be independently established not acquired from or split off another business.
Formation Conditions
Your business should not be formed by splitting up or reconstructing an existing business except if it's a re established business.
Compliance and Deduction
File your Income Tax Return on time. Submit a Chartered Accountant report (Form 10DA) to claim deductions under Section 80JJAA.
What Are The Conditions To Be Fulfilled To Claim Deductions Under Section 80JJAA?
Section 80JJAA of the Income Tax Act allows certain businesses to claim a tax deduction for hiring additional employees. Conditions for availing deduction:
1. Businesses that are registered under the Employees Provident Funds Act and engaged in manufacturing or production of specified goods can claim this deduction.
2. Business should not be formed from the transfer of ownership or reconstruction of an existing business.
3. Additional employees must have been hired in the previous financial year.
4. Each new employee's monthly salary should be less than Rs 25,000.
5. Employee must have worked for at least 240 days in the previous year.
Penalties For Claiming False Deductions Under Section 80JJAA
Under Section 80JJAA of the Income Tax Act in India claiming false deductions can result in serious consequences. Here are the penalties and consequences for falsely claiming deductions under this section:
1. If a taxpayer is found to have furnished inaccurate particulars of their income including claiming deductions under Section 80JJAA that are not genuine or supported by valid documentation they can be liable for a penalty. The penalty can be levied under Section 271(1)(c) of the Income Tax Act.
2. Penalty amount can range from 100% to 300% of the tax sought to be evaded. This is in addition to the tax payable on the income that was under reported due to false deductions claimed.
3. The Income Tax Department can reassess the taxpayer's income for up to 6 years if false deductions are discovered. This may lead to additional tax liabilities, penalties and interest.
Therefore taxpayers must ensure that any deductions claimed under Section 80JJAA or any other provision of the Income Tax Act are genuine and supported by appropriate documentation. False claims can lead to severe financial penalties, criminal prosecution, and other legal consequences.
Conclusion
Section 80JJAA provides deductions specifically aimed at businesses involved in manufacturing. This means if your business is in manufacturing and meets the specified criteria you can claim these deductions. However it's crucial to carefully review the eligibility criteria to ensure you qualify and to avoid any errors in your deduction claims. Remember this deduction does not apply to businesses in the service sector so understanding these distinctions is key to managing your tax filings correctly.
More About Tax
- Section 115BAA-Overview
- Section 16
- Section 194P
- Section 197
- Section 10
- Form 10
- Section 194K
- Section 195
- Section 194S
- Section 194R
- Section 194Q
- Section 80M
- Section 80JJAA
- Section 80GGB
- Section 44AD
- Form 12C
- Form 10-IC
- Form 10BE
- Form 10BD
- Form 10A
- Form 10B
- All About Income Tax Clearance Certificate
- Section 206C
- Section 206AA
- Section 194O
- Section 194DA
- Section 194B
- Section 194A
- Section 80DD
- Municipal Bonds
- Form 20A
- Form 10BB
- Section 80QQB
- Section 80P
- Section 80IA
- Section 80EEB
- Section 44AE
- GSTR 5A
- GSTR-5
- GSTR 11
- GST ITC 04 Form
- Form CMP-08
- GSTR 10
- GSTR 9A
- GSTR 8
- GSTR 7
- GSTR 6
- GSTR 4
- GSTR 9
- GSTR 3B
- GSTR 1
- Section 80TTB
- Section 80E
- Section 80D Of Income Tax Act
- Form 27EQ
- Form 24Q
- Form 10IE
- Section 10(10D)
- Form 3CEB
- Section 44AB
- Form 3CA
- ITR 4
- ITR 3
- Form 12BB
- Form 3CB
- Form 27A
- Section 194M
- Form 27Q
- Form 16B
- Form 16A
- Section 194LA
- Section 80GGC
- Section 80GGA
- Form 26QC
- Form 16C
- Section 1941B
- Section 194IA
- Section 194D
- Section 192A
- Section 192
- Supply without consideration under GST
- List of Goods & Services Exempt Under GST
- How to Pay GST Online?
- GST Impact on Mutual Funds
- Documents Required for GST Registration
- How to Deposit Self Assessment Tax Online?
- How to Get Income Tax Return Copy Online?
- How can traders avoid income tax Notices?
- Income Tax Return Filing For Futures And Options
- Income Tax Return (ITR) for Mutual Funds
- What Are Tax Benefits on Gold Loan
- Payroll Tax
- Income Tax for Freelancers
- Tax Saving Tips for Entrepreneurs
- Tax Base
- 5 Heads of Income Tax
- Income Tax Exemptions for Salaried Employees
- How to Deal with Income Tax Notice
- Income Tax For Beginners
- How to save tax in India
- What Taxes Has GST Replaced?
- How to Register for GST India Online
- How to File GST Returns for Multiple GSTINs
- Suspension of GST registration
- GST vs Income Tax
- What Is HSN Code
- GST Composition Scheme
- History of GST in India
- Difference Between GST and VAT
- What is Nil ITR Filing and How to File It?
- How to File ITR for Freelancer
- 10 Tips for First-time Taxpayers While Filing for ITR
- Tax Saving Options Other Than Section 80C
- Tax Benefits of Loans in India
- Tax Benefit on Home Loan
- Last minute Tax Filing Tips
- Income Tax Slab for Women
- Tax Deducted at Source (TDS) under Goods and Service Tax
- GST Interstate vs GST Intrastate
- What is GSTIN?
- What is Amnesty Scheme for GST
- Eligibility for GST
- What is Tax Loss Harvesting?
- Progressive Tax
- Tax Write Off
- Consumption Tax
- How to Pay Off Debt Faster
- What is Withholding Tax?
- Tax Avoidance
- What is Marginal Tax Rate?
- Tax to GDP Ratio
- What is Non Tax Revenue?
- Tax Benefits From Equity Investment
- What is Form 61A?
- What is Form 49B?
- What is Form 26Q?
- What is Form 15CB?
- What is Form 15CA?
- What is Form 10F?
- What is Form 10E in Income Tax?
- What is Form 10BA?
- What is Form 3CD?
- Wealth tax
- Input Tax Credit (ITC) under GST
- SGST – State Goods and Service Tax
- What are Payroll Taxes?
- ITR 1 vs ITR 2
- 15h Form
- Excise Duty on Petrol and Diesel
- GST on Rent
- Late Fees and Interest on GST Return
- Corporate Tax
- Depreciation under Income Tax Act
- Reverse Charge Mechanism (RCM)
- General Anti-Avoidance Rule (GAAR)
- Difference Between Tax Evasion and Tax Avoidance
- Excise Duty
- CGST - Central Goods and Services Tax
- Tax Evasion
- Residential Status Under the Income Tax Act
- 80EEA Income Tax
- GST on Cement
- What is Patta Chitta
- Payment of Gratuity Act 1972
- Integrated Goods and Services Tax (IGST)
- What Is TCS Tax?
- What Is Dearness Allowance?
- What Is TAN?
- What Are TDS Traces?
- Income Tax for NRI
- ITR Filing Last Date FY 2022-23 (AY 2023-24)
- Difference Between TDS and TCS
- Difference Between Direct Tax vs Indirect Tax
- GST Refund Process
- GST Invoice
- GST compliance
- Income Tax Rebate under Section 87A
- Section 44ADA
- Tax Saving FD
- Section 80CCC
- What Is Section 194I?
- GST On Restaurants
- Advantages and Disadvantages of GST
- Cess on Income Tax
- Standard Deduction Under Section 16 IA
- Capital Gain Tax on Property
- Section 186 Of the Companies Act 2013
- Section 185 Of the Companies Act 2013
- Section 115 BAC of the Income Tax Act
- GSTR 9C
- What is Memorandum of Association?
- 80ccd of Income Tax Act
- Types of Taxes in India
- GST on Gold
- GST Slab Rates 2023
- What is Leave Travel Allowance (LTA)?
- GST on Car
- Section 12A
- Self Assessment Tax
- GSTR 2B
- GSTR 2A
- GST on Mobile Phones
- Difference Between Assessment year and Financial year
- How to Check Income Tax Refund Status
- What Is Voluntary Provident Fund?
- What Is Perquisites
- What Is Conveyance Allowance?
- Section 80DDB Of Income Tax Act
- What is Agriculture Income?
- Section 80u
- Section 80gg
- 194n TDS
- What is 194c
- 50 30 20 rule
- 194h TDS
- What is Gross Salary?
- Old vs New Tax Regime
- What Is Short Term Capital Gains Tax?
- What Is 80TTA Deduction?
- Income Tax Slab 2023
- Form 26AS - How to Download Form 26AS
- Income Tax Slab for Senior Citizens: FY 2023-24 (AY 2024-25)
- What is a Financial Year?
- Deferred Tax
- Section 80G - Donations Eligible Under Section 80G
- Section 80EE- Income Tax Deduction for Interest on Home Loan
- Form 26QB: TDS on Sale of Property
- Section 194J - TDS for Professional or Technical Services
- Section 194H – TDS on Commission and Brokerage
- How to Check TDS Refund Status?
- Securities Transaction Tax
- How To Save Tax In India Without Investment?
- What is Indirect Tax?
- What is a Fiscal Deficit?
- What is Debt-to-Equity (D/E) Ratio?
- What is Reverse Repo Rate?
- What is Repo Rate?
- What is Professional Tax?
- What are Capital Gains?
- What is Direct Tax?
- What is Form 16?
- What is TDS? Read More
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer please Click here.
Frequently Asked Questions
Yes, documents such as audited financial statements, employee details and Form 10DA are required for Section 80JJAA benefits.
Section 80JJAA incentivizes employers with tax deductions for hiring new employees benefiting both employers financially and employees through increased job opportunities.
Business formed by splitting or reconstructing an existing one or acquired through business reorganization falls under specified conditions.