Quick answer: Section 80JJAA of the Income-tax Act, 1961 lets a business deduct 30 percent of its additional employee cost from taxable profits, and it can claim this for three consecutive assessment years in a row, the year of hiring plus the next two. You must get your accounts audited under Section 44AB and file a chartered accountant report in Form 10DA. Best of all, it is one of the few deductions that still works under the new default tax regime.
Hiring more people usually means more salary outgo, not a tax break. Section 80JJAA flips that for genuine job creators. If your business adds new workers and you tick every box below, the law rewards you with a deduction worth 30 percent of what you pay those new hires, repeated across three years. Below is the eligibility checklist, a worked three-year calculation, the new-regime catch most people miss, and the exact filing steps.
You qualify if all of these are true:
An “additional employee” does NOT include any worker who:
If a worker fails even one of these tests, their wages do not count toward your additional employee cost. “Additional employee cost” itself simply means the total emoluments paid or payable to the qualifying additional employees during the year.
Meet Anjali Verma, who runs a small packaging unit in Surat. In FY 2025-26 she hires 10 new workers, each earning 18,000 rupees a month, all on EPF, all working the full year. None earns over 25,000 rupees a month, so all 10 qualify.
Across three assessment years Anjali deducts 19,44,000 rupees from taxable profit for one year's hiring. If she stays in the 30 percent tax bracket, that is roughly 5.83 lakh rupees of tax saved over three years, on top of normally deducting the salaries as a business expense. And if she hires another batch next year, a fresh three-year cycle begins for them too.
Section 80JJAA survives the new tax regime. Under Section 115BAC, the default regime from FY 2023-24 onwards, almost every Chapter VI-A deduction is switched off, no 80C, no 80D, no 80G. The Income Tax Department's own FAQ confirms the rare exceptions: “Chapter-VIA deductions cannot be claimed, except deduction u/s 80CCD(2), 80CCH and 80JJAA.” So a company on the lower new-regime rates can still claim 80JJAA in full.
This makes 80JJAA unusually valuable. Many firms assume the new regime kills all deductions and stop checking. It does not. For a growing employer, this is real money left on the table if ignored.
Yes. The Income Tax Department FAQ confirms that under Section 115BAC, Chapter VI-A deductions are barred except 80CCD(2), 80CCH and 80JJAA. So 80JJAA can be claimed even on the new default regime.
Three consecutive assessment years for each batch of qualifying new hires, the year you employ them plus the two following years. Each fresh batch starts its own three-year run.
No. The deduction is for income under “Profits and gains of business or profession” arising from a business. Income from a profession does not qualify, and the accounts must be audited under Section 44AB.
The total emoluments paid or payable during the year to the additional employees who pass all the eligibility tests. In an existing business, if total headcount did not rise, the additional employee cost is treated as nil.
A worker whose total monthly emoluments exceed 25,000 rupees is not an additional employee for 80JJAA. Only those at or below 25,000 rupees a month are counted.
Yes. You must obtain and file a report from a chartered accountant in Form 10DA certifying the additional employee cost, before furnishing your income-tax return.
An employee must work at least 240 days in the previous year to count. For businesses manufacturing apparel, footwear or leather products, the threshold is relaxed to 150 days.
Yes. The salaries are already a deductible business expense. Section 80JJAA gives an extra 30 percent deduction on the additional employee cost on top of that, for three years.