Section 80JJAA: 30% Deduction on New Employee Cost in India

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:

• You earn income from business (not a profession), and your accounts are audited under Section 44AB.
• You file a chartered accountant report in Form 10DA along with your return.
• Your total headcount actually went up during the year (more people joined than left).
• The new workers are on a recognised provident fund.

An “additional employee” does NOT include any worker who:

• Earns more than 25,000 rupees a month in total emoluments.
• Has their entire pension contribution paid by the Government under the Employees Pension Scheme.
• Worked fewer than 240 days in the year (relaxed to 150 days for businesses making apparel, footwear or leather products).
• Does not participate in a recognised provident fund.

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.

• Additional employee cost = 10 workers x 18,000 x 12 months = 21,60,000 rupees.
• Year 1 deduction (AY 2026-27) = 30 percent of 21,60,000 = 6,48,000 rupees.
• Year 2 deduction (AY 2027-28) = another 6,48,000 rupees for the same batch.
• Year 3 deduction (AY 2028-29) = a final 6,48,000 rupees.

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.

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.

1. Confirm audit applies. Your accounts must be audited under Section 44AB for the year. Without a 44AB audit, the deduction is not available.
2. Identify qualifying additional employees. Run the four exclusion tests above against each new hire. Drop anyone over 25,000 rupees a month, under 240 days (or 150 for apparel/footwear/leather), outside the recognised PF, or whose EPS is fully government-funded.
3. Check net headcount. Confirm joiners exceeded leavers, so your additional employee cost is genuinely positive.
4. Get Form 10DA from your CA. Your chartered accountant computes the additional employee cost and certifies it in Form 10DA, filed electronically on the income-tax portal before you file your return.
5. Claim in the ITR. Enter the 30 percent figure under the 80JJAA field of your income-tax return (ITR-3, ITR-5 or ITR-6 as applicable). Repeat for years two and three.

• Counting high earners. A new manager on 60,000 rupees a month is not an “additional employee” here. The 25,000 rupee monthly ceiling is strict.
• Forgetting the 240-day rule. A worker hired in February who logs only 90 days in the year does not count this year, though they may count next year.
• Skipping Form 10DA. No CA report, no deduction. The report is mandatory and must be filed before the return.
• Assuming it is gone in the new regime. As shown above, 80JJAA is expressly preserved under Section 115BAC.
• Claiming on contract labour outside PF. Workers not on a recognised provident fund are excluded.

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.

• Income Tax Department, Section 80JJAA: https://www.incometaxindia.gov.in/w/section-80jjaa-30
• Income Tax Department, New tax vs old tax regime FAQs (115BAC exceptions): https://www.incometax.gov.in/iec/foportal/help/new-tax-vs-old-tax-regime-faqs
• Income-tax Act, 1961, full text: https://www.indiacode.nic.in/handle/123456789/2435

• Section 80CCD(2): employer NPS deduction allowed in the new regime
• Presumptive taxation under 44AD and 44ADA
• The Right to Information Act 2005
• AI RTI Draft App: file an RTI in minutes
• The RTI Playbook