[Opinion] Section 80JJAA – Some Controversial Issues
- Blog|News|Income Tax|
- 2 Min Read
- By Taxmann
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- Last Updated on 21 December, 2023
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CA Bharat Sonkhiya, CA Aakansha Tuteja & Ayushi Todi – [2023] 157 taxmann.com 410 (Article)
In the dynamic landscape of India’s economic policies, certain provisions stand out as catalysts for change. Among these is Section 80JJAA of the Income Tax Act (“ITA”), 1961 — a provision designed not only to benefit businesses but to foster employment generation, aligning with the nation’s vision for inclusive growth.
By providing a tax deduction, the government aims to encourage employers to generate new employment opportunities, incentivize employers to hire more peopleand thereby reduce the rate of unemployment in the country.
Section 80JJAA was inserted in the Income-tax Act by Finance Act 1998 w.e.f. 01-04-1999. The associated lack of clarity is manifested by frequent amendments carried out in this section. The Finance Act, 2016 brought fundamental changes in the course of claiming deduction under this section.
Let’s examine a concise overview of the section both before and after the amendment:
| Basis | Before Finance Act, 2016 | After Finance Act, 2016 |
| Eligible Assessee | Indian company being an industrial undertaking engaged in the manufacture or production of article of thing. | All assessees who are required to get their accounts audited under section 44AB and whose gross total income includes any profits and gains derived from business. |
| Additional Cost | Deduction of an amount equal to 30% of Additional Wages paid to New Regular Workmen employed in any previous year. | Deduction of an amount equal to 30% of Additional Employee Cost paid to Additional Employees employed in any previous year. |
| Period of Employment of Additional Employee/Workmen | Workman shall be in employment for at least 300 days during the year | Employee shall be in employment for at least 240 days (150 days in case of business of manufacturing of apparel or footwear or leather products) during the previous year |
| Conditions | The increase in the number of regular workmen should be at least 10 per cent of the existing number of workmen and further that the number of workmen hitherto in employment was at least 100 (later reduced to 50) | There must be increase in total number of employees as on the last day of the preceding year and emoluments of such additional employees must be less than Rs. 25,000 per month and participating in Recognised Provident Fund. |
| New Businesses | Deduction shall be available of wages paid to workmen over and above 100 (reduced to 50). The number of such workmen must be at least 100 (reduced to 50) | Deduction shall be available of all emoluments paid or payable to employees employed during that year. |
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Wages v/s Emoluments
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Wages paid not payable to new regular workmen employed during the previous year.
Wages can be paid by cash or bank or any other electronic modes.
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Emoluments means any sum paid or payable to an employee in lieu of his employment but excludes –
These must be paid by an account payee cheque or account payee bank draft or by use of electronic clearing system or other prescribed electronic modes.
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