Tax Deduction for employing extra workmen – 80JJAA

Tax deduction is available from taxable profits of 30% of additional wages paid to new regular workmen in either a newly formed undertaking or in an existing one for three consecutive assessment years beginning with the assessment year pertaining to the financial year in which such employment is provided. Basic points to be noted in this regard:

Conditions to be fulfilled:

  • Deduction is available only to an Indian Company.
  • The assessee should derive profits from any industrial undertaking engaged in the manufacture or production of an article or thing.
  • In case of new undertaking, it should not be formed by the splitting up or reconstruction of an existing undertaking or amalgamation with another undertaking.

Regular Workmen

Regular workman does not include the following

  • a casual workman;
  • a workman employed through contract labour; or
  • any other workman employed for a period of less than 300 days during the previous year.

Additional Wages

It means wages paid to new workmen in excess of 100 who are employed during a financial year. This is subject to the condition that the increase in the number of regular workmen employed should be at least 10% of the existing regular workmen employed in the undertaking on the last day of the preceeding financial year.

Say, for example:

X ltd. is a new undertaking and it started its production during 2009-10.

On 31st March, 2010 – No. of regular workmen is 110.

On 1st June, 2010 – New regular workmen appointed is 30.

In this case, deduction will be available in the following manner:

On 31st March, 2010 – Deduction will be available for wages paid to 10 workmen (110-100) as number of workmen exceeds 100.

On 31st March, 2011 – Deduction will be available for wages paid to 30 workmen, as new regular workmen (that is, 30) exceeds 10% of regular workmen on the last day of the preceeding financial year, that is, 11 (10% of 110) workmen.

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