TaxTMI 
TaxTMI 
Continuing the legislative policy of incentivizing employment generation : Clause 146 of Income Tax Bill, 2025 vs. Section 80JJAA of Income Tax Act, 1961
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....onsecutive tax years. The clause is a successor to and, in several respects, a re-enactment of Section 80JJAA of the Income-tax Act, 1961, which has been the cornerstone for such deductions for over two decades. The mechanism for compliance and reporting under this deduction is further detailed in Rule 19AB of the Income-tax Rules, 1962, which prescribes the form and manner of the accountant's report required to claim the deduction. This commentary provides a comprehensive analysis of Clause 146, examining its objectives, operative provisions, and practical implications. It then undertakes a granular comparison with Section 80JJAA of the Income-tax Act, 1961 and Rule 19AB of the 1962 Rules, highlighting similarities, differences, and t....
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....ncludes profits and gains from business. The deduction is set at 30% of the "additional employee cost" incurred during the tax year. Sub-section (2) allows this deduction for three consecutive tax years, beginning with the year in which the employment is provided. * Scope of Assessee: The provision is broad, extending to all assessees with business income, subject to compliance with Section 63 (which likely pertains to audit requirements, akin to Section 44AB of the Income-tax Act, 1961). * Quantum and Duration: The deduction is substantial-30% of the additional employee cost for three years-making it a significant incentive for businesses to hire additional employees. 2. Conditions for Allowance - Sub-section (3) Deduction is de....
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....reases the total number of employees as on the last day of the preceding tax year, but excludes: * Employees with emoluments exceeding Rs. 25,000 per month; * Employees for whom the government pays the entire Employees' Pension Scheme contribution; * Employees employed for less than 150 days (apparel/footwear/leather sectors) or 240 days (other sectors), with a carry-forward provision for those who meet the threshold in the succeeding tax year; * Employees not participating in a recognized provident fund. c) Emoluments "Emoluments" cover all sums paid or payable to an employee for employment, but exclude: * Employer contributions to pension/provident or other employee funds; * Lump-sum payments at termination, superannuati....
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....re agnostic to business type, covering all businesses with profits and gains. 2. Conditions and Exclusions * The anti-abuse conditions (splitting up, reconstruction, transfer, reorganization) are identical in both provisions. * The exception for revival of business (Section 33B in 80JJAA; Section 140(4) in Clause 146) is maintained, ensuring parity in policy for sick unit revival. * The requirement for an accountant's report, with particulars as prescribed, is present in both, though references to the relevant sections/rules differ due to the legislative framework. 3. Definitions a) Additional Employee Cost The definition and computation are nearly identical. Both provide that in the first year of a new business, all emolument....
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....fting Clarity: The new clause is more succinct and modern in its language, potentially enhancing interpretative clarity. * Potential for Further Prescription: Clause 146 refers to "such other electronic mode as prescribed," leaving room for the rules to expand acceptable payment modes in the future, reflecting technological advancements. Comparative Analysis with Rule 19AB of the Income-tax Rules, 1962 1. Purpose and Content Rule 19AB prescribes the form and manner in which the accountant's report (Form 10DA) must be furnished to claim the deduction u/s 80JJAA. The rule is procedural, not substantive, but is critical for compliance. 2. Reporting Requirements * The report must be in Form 10DA, containing particulars about the add....