Section 80 – JJAA is concerned with the deduction of cost of the additional employees and came into effect from assessment year 2017-18. As per the section, the definition of an additional employee is someone whose:
- Total Salary is over 25000 INR per month
- Employee who is not a part of recognized provident fund
- Employee who has joined the company and has been employed for less than 240 days in the previous year
- If the Government pays entire contribution of the employee under Employees’ pension scheme
However, the employer has to ensure that he fulfills the eligibility criteria in order to claim the deductions
- If the assesse needs to get his book of accounts audited under section 44AB
- If the income earned is inclusive of profit and gains from the business
Who is not applicable for the deduction?
There are certain provisions laid down in the section 80 JJAA wherein the assesses is not applicable for the deduction. These provisions are:
- Business is a result of reconstruction or splitting. This also has the exception as the reconstruction or splitting of the business is eligible in the events of natural calamity such as earthquake, riots, enemy attacks and so on.
- If the acquisition of the business is done through transfer from any other individual or due to business reorganization
In section 80-JJAA there is a provision called emoluments wherein total sum paid or payable to the employee in lieu of his employment and does not include:
Any amount that the employee has received at the time of termination of service, voluntary retirement of superannuation.
Emoluments mean any sum paid or payable to an employee in lieu of his employment by whatever name called, but does not include:
- Any contribution paid or payable by the employer to any pension fund or provident fund or any other fund for the benefit to the employee under any law for the time being in force.
- Any lump-sum payment paid or payable to an employee at the time of termination of service or superannuation or voluntary retirement, such as gratuity, severance pay, leave encashment, voluntary retrenchment benefits, commutation of pension and so on.
As per the Rule 19AB of the income tax rule, 1962 the employer should be in the possession of Form 10DA from an accountant who is in practice. The form 10DA should have deduction and various other required information mentioned. Employer is required to have this form before filing the income-tax return for the assessment year.
Under the provision, any employer who has not filed the Form 10DA is not eligible for the deduction under 80JJAA
There are certain issues that are still left to be clarified and in the lack of the same, taxpayers often end up having their own interpretation about the same. For instance, one of the points that needs to be clarified is on how to interpret the benefits excluding the monthly salary to the employees. These benefits could be in the form of bonus etc.