Flexers is a mid-sized company based in Chennai engaged in the manufacture of rubber boards. The Company has received several orders in the financial year 2019 and has increased number of employees from 225 at the beginning of the year to 298 at the end of the year.
Is Flexers entitled to any tax benefit in 2019?
Possibly, because Flexers has higher number of employees at the end of financial year 2019 compared to the beginning of the year. However, Flexers will also need to comply with following additional conditions to claim benefit under Section 80JJAA which is equal to 30% of the total emoluments (salary excluding pension/PF and gratuity) to new employees:
The new employee must have been employed for 240 days (150 days in case of apparel industry) i.e. should have been employed before 4 August of each financial year.
The new employees will only include employees whose total emoluments are less than 25,000 rupees per month.
The great thing about this benefit is that it is available for three years beginning with the year in which new employees are hired.
Wait, before you rush to claim the benefit, remember that there are some other conditions that you need to fulfil. You will also need to provide a certificate from a Chartered Accountant who will certify that the amount claimed by you is correct.
If Flexers is a professional services firm, will it be able to claim the deduction?
Answer: No. at the wording of the section only mentions assesses earning profits and gains from business.
If the turnover of Flexers is Rs. 50 lacs, will it be able to claim the deduction?
Answer: No. As only companies subject to tax audit under Section 44AB (turnover exceeding Rs. 1 crore) can claim deduction under this section.
Rupee Tax – making every rupee count