Section 80JJAA: Deduction for Employment Generation

Applicable to: All businesses (except freelancers)*

This section provides 30-60% additional wage cost deduction for creating new regular employment, incentivizing job creation in the formal sector.

Key Features (AY 2025-26)

1.  Eligibility Criteria

✅ New Employees Hired:

• Must work ≥240 days in year (150 days for apparel manufacturing)
• Salary ≤ ₹25,000/month
• First-time employment(not rehired former employees)

✅ Business Requirements:

• Must file Form 10DAwith audited financials
• Maintain EPF/ESI recordsfor all eligible employees

2.  Deduction Calculation

Formula:
(Current Year Wages – Base Year Wages) × 30%/60%

3. Required Documents

• EPF/ESI returns
• Employee joining reports(Form 10DA Annexure)
• Salary registers(showing ≤₹25,000/month)

Illustrative Example

Textile Company Hiring 50 Workers

• Average Salary:₹20,000/month
• Additional Annual Wages:₹1.2 crore (50 × ₹20k × 12)
• Deduction (@60%):₹72 lakh
• Tax Saved (@30%):₹21.6 lakh/year (for 3 years)

Comparison with Similar Sections

Pro Tips for Compliance

1. Hire Before March 31to maximize full-year deduction
2. Use Payroll Softwareto track 240-day thresholds
3. Combine with PMRPY(govt pays 8.33% EPF for new hires)

FAQs

Q: Can contractors/outsourced staff qualify?
A: No, only direct employees on payroll.

Q: Is there a minimum employee addition requirement?
A: No, but deduction scales with headcount growth.

Q: Can existing employees getting raises qualify?
A: No, only net new hires count.

Conclusion

Section 80JJAA is a powerful tool for labor-intensive businesses to reduce tax liability while expanding workforce. Key action points:

• Audit payroll systemsfor compliance
• File Form 10DAwith ITR
• Leverage additional subsidieslike PMRPY