Chapter 8: Deductions from Gross Total Income (Chapter VIII / VI-A)
1. Section 80JJAA: Employment of New Employees
| Parameter | Statutory Condition / Quantum |
|---|---|
| Eligible Assessee | All assessees to whom Tax Audit u/s 44AB applies, deriving business profits. |
| Deduction Quantum | 30% of Additional Employee Cost for 3 Assessment Years. |
| Additional Employee Definition | An employee who has been employed during the previous year whose employment results in an increase in total number of employees, EXCLUDING:
• Monthly emoluments > ₹ 25,000. • Employed for less than 240 days (150 days in apparel/footwear/leather). • Does not participate in recognized provident fund. |
| Payment Mode | Paid by Account Payee cheque, DD, or ECS / digital payment. Cash payment is excluded. |
2. Section 80M: Inter-Corporate Dividends
Provides relief against cascading effect of taxation on dividends received by a domestic company from another domestic company, foreign company, or business trust.
Deduction Formula:
$ ext{Deduction u/s 80M} = ext{LOWER of:}$
(a) Dividend received by domestic company, OR
(b) Dividend distributed by it on or before the due date (one month prior to return filing due date u/s 139(1)).
$ ext{Deduction u/s 80M} = ext{LOWER of:}$
(a) Dividend received by domestic company, OR
(b) Dividend distributed by it on or before the due date (one month prior to return filing due date u/s 139(1)).
3. Section 80LA (IFSC Units) & Section 80-IAC (Startups)
| Section | Eligible Business | Deduction Percentage | Eligible Period |
|---|---|---|---|
| Sec 80LA | Unit in International Financial Services Centre (IFSC) or offshore banking unit | 100% of income | Any 10 consecutive AYs out of 15 years beginning with the year of permission. |
| Sec 80-IAC | Eligible Startup holding DPIIT certificate (Turnover $\le$ ₹ 100 Crores) | 100% of profits | Any 3 consecutive AYs out of 10 years beginning from year of incorporation. |
4. Section 80G Donations Master Table
| Category | Eligible Funds / Donees | Deduction % | Qualifying Limit |
|---|---|---|---|
| Category A | National Defence Fund, PM CARES Fund, Clean Ganga Fund | 100% | No qualifying limit. |
| Category B | PM Drought Relief Fund | 50% | No qualifying limit. |
| Category C | Promoting Family Planning (Government/approved local authority) | 100% | Subject to Qualifying Limit ($10\%$ of Adjusted GTI). |
| Category D | Approved charitable trusts, repair of notified temple/mosque/church | 50% | Subject to Qualifying Limit ($10\%$ of Adjusted GTI). |
Cash Donation Cap: No deduction allowed for any donation exceeding ₹ 2,000 in cash!
5. High-Frequency Exam Traps
Trap 1: Chapter VI-A deductions under Default Regime!
Under Section 115BAC / Sec 202, ALL Chapter VI-A deductions are disallowed EXCEPT: Section 80JJAA (New employment), Section 80M (Inter-corporate dividends), Section 80LA(1A) (IFSC units), and Section 80CCD(2) / 80CCH(2) (Employer PF/NPS contribution).
Under Section 115BAC / Sec 202, ALL Chapter VI-A deductions are disallowed EXCEPT: Section 80JJAA (New employment), Section 80M (Inter-corporate dividends), Section 80LA(1A) (IFSC units), and Section 80CCD(2) / 80CCH(2) (Employer PF/NPS contribution).
Trap 2: Deduction cannot exceed Gross Total Income!
Aggregate deductions under Chapter VI-A cannot exceed Gross Total Income (excluding LTCG, STCG u/s 111A, and winnings u/s 115BB/115BBJ).
Aggregate deductions under Chapter VI-A cannot exceed Gross Total Income (excluding LTCG, STCG u/s 111A, and winnings u/s 115BB/115BBJ).