Business Income Tax Deduction

There have been frequent requests for Business Income Tax Deductions and Tax Planning in the case of Companies.

Here, we are going to discuss about Corporate Income Tax Deductions available for Additional wages paid.

Conditions

1. Are you owning an Indian Company with Manufacturing or Production unit?

2. Are you expanding your business or adding more employees?

Then take note that additional wages paid to new regular workmen employed can give you additional income tax deduction.

Tax Deductions

30% of the additional wages paid to regular workmen can be claimed by the Indian Company as deduction for three consecutive years under Section 80JJAA.

Note: -

This tax benefit is available only to manufacturing or production unit. Service based companies, like, BPO Units, cannot claim this tax deduction.

Terms Explanation

Regular Workmen: -

Regular workmen does not include -

• A casual workman, or
• A workman employed through contract labour, or
• Any other workman employed for a period less than 300 days during the previous year.

Additional Wages: -

Additional wages means the wages paid to the new regular workmen in excess of 100 workmen employed during the previous year.

However, if the increase in the number of regular workmen employed during the year is less than 10% of existing number of workmen employed in such undertaking as on the last day of the preceding previous year, the additional wages shall be "Nil".

Go to Top

Secnario 1 (Eligible)

You own a company engaging currently 150 employees. You are adding another unit with similar number of employees, i.e., 150.

Then you can claim tax deduction for additional wages in respect of 50 employees, i.e., wages in respect of more than 100 employees, say, Rs.30 Lakhs. Take 30% thereof - Rs.9 Lakhs.

This can be claimed as Business income tax deduction for 3 years. Don't forget, you should have so much income to absorb it.

Go to Top

Secnario 2 (Not Eligible)

You own a company engaging currently 1800 employees. You have recruited additionally 150 employees. You cannot claim this income tax deduction benefit, since the additional employees do not exceed 10% of the previous year employment (i.e., 180 employees).

Go to Top