Additional employee cost deduction (incremental hiring)

Businesses subject to tax audit get an extra 30% deduction on additional employee cost for THREE consecutive years, provided the new employee earns ≤ ₹25,000/month, works ≥ 240 days (150 for apparel / footwear / leather), and is enrolled in EPF.

Key points

• §80JJAA applies to ALL assessees (not just companies) whose gross total income includes profits from a business subject to tax audit under §44AB.
• The deduction equals 30% of 'additional employee cost' incurred during the previous year, allowed for THREE consecutive AYs starting from the AY in which the employment is provided.
• 'Additional employee' means an employee whose: (a) total emoluments do NOT exceed ₹25,000 per month;
• (b) employment is for at least 240 days in the previous year (150 days for businesses in manufacturing of apparel, footwear, or leather products);
• (c) employee participates in a recognised Employees' Provident Fund.
• Employees whose entire contribution to EPF is paid by the Government under the Employees' Pension Scheme are excluded.
• The deduction is NOT available where the business is formed by splitting up / reconstruction of an existing business, OR where the business is acquired by way of transfer from any other person or as a result of any business reorganisation.
• Form 10DA (audit report by a CA) MUST be furnished electronically before the due date u/s 139(1) to claim the deduction.
• Available even under §115BAA (the concessional 22% regime specifically retains §80JJAA and §80M).

Reference: §80JJAA, ITA 1961 — under ITA 2025 (FY 26-27 onwards), this is §146