Section 80JJA and Section 80JJAA: Biodegradable Waste and Additional Employee Cost Deductions

Which Income Tax Act applies now?

The Income-tax Act, 2025 came into force on 1 April 2026. Tax Year 2026-27 and later years are governed by the new Act. Matters relating to earlier years continue under the Income-tax Act, 1961 where preserved by the repeal and saving provisions.

This distinction is important for search and compliance. A taxpayer dealing with Assessment Year 2026-27 may still encounter the old Section 80JJA and Section 80JJAA references, while a deduction arising for Tax Year 2026-27 is to be examined under Sections 145 and 146 of the Income-tax Act, 2025.

Section 145 of Income Tax Act 2025: deduction for biodegradable waste business

Section 145 provides a profit-linked deduction where the gross total income includes profits and gains derived from the business of collecting and processing or treating biodegradable waste for specified purposes.

Eligible activities

The business must collect and process or treat biodegradable waste for one or more of the following purposes:

• generating power;
• producing bio-fertilizers, bio-pesticides or other biological agents;
• producing bio-gas; or
• making pellets or briquettes for fuel or organic manure.

The deduction is linked to profits derived from the eligible business. Proper books and records should therefore enable the eligible business profits to be identified and supported.

Section 146 of Income Tax Act 2025: deduction for additional employee cost

Section 146 is the current counterpart of Section 80JJAA. It applies where the gross total income of an assessee to whom the tax-audit provision in Section 63 applies includes profits and gains derived from business, subject to the statutory conditions.

When the deduction is not allowed

Subject to the statutory exception for specified re-establishment, reconstruction or revival, the deduction is not available where:

• the business is formed by splitting up or reconstruction of an existing business;
• the business is acquired by transfer from another person or as a result of business reorganisation; or
• the prescribed accountant's report is not furnished before the specified date.

Important definitions under the additional employee cost deduction

Additional employee cost

Broadly, additional employee cost means the total emoluments paid or payable to additional employees employed during the tax year. In the first year of a new business, the emoluments paid or payable to employees employed during that year are treated as additional employee cost.

For an existing business, the additional employee cost is nil where there is no increase in the number of employees over the number employed on the last day of the preceding tax year, or where emoluments are paid otherwise than through the permitted banking or prescribed electronic modes.

Additional employee

An additional employee is an employee whose employment increases the total number of employees compared with the last day of the preceding tax year. The statutory exclusions include, among others:

• an employee whose total emoluments exceed Rs. 25,000 per month;
• an employee for whom the entire contribution is paid by the Government under the specified Employees' Pension Scheme;
• an employee who does not participate in a recognised provident fund; and
• an employee who does not satisfy the minimum employment-period requirement.

Minimum employment period

The general minimum period is 240 days during the tax year. For an assessee engaged in the business of manufacturing apparel, footwear or leather products, the period is 150 days. The law also contains a rule for an employee who falls short of the required period in the first year but satisfies it in the immediately succeeding year.

Emoluments

Emoluments generally cover sums paid or payable to an employee in lieu of employment. They exclude specified employer contributions to pension, provident or other employee-benefit funds and specified lump-sum payments made on termination, superannuation or voluntary retirement, such as gratuity, severance pay, leave encashment and similar payments.

Accountant report for Section 146 deduction

Under the Income-tax Rules, 2026, the report for deduction in respect of additional employee cost under Section 146 is prescribed in Form No. 34. This replaces the old Form 10DA used for Section 80JJAA under the 1961 Act.

The report contains basic assessee information, employee counts, eligible emoluments and the computation of the deduction. Taxpayers should use the form and filing process applicable to the relevant tax year and verify the current e-Filing requirements before filing.

Legacy Section 80JJA of Income Tax Act 1961

Section 80JJA allowed a deduction equal to 100% of profits and gains derived from the eligible business of collecting and processing or treating biodegradable waste for five consecutive assessment years beginning with the assessment year relevant to the previous year in which the business commenced.

Legacy Section 80JJAA of Income Tax Act 1961

Section 80JJAA, under its later form, was titled Deduction in respect of employment of new employees. It generally allowed an assessee to whom Section 44AB applied a deduction equal to 30% of additional employee cost for three assessment years, subject to its conditions and definitions.

For claims governed by the 1961 Act, the statutory text, applicable Finance Act amendments, relevant rules and Form 10DA requirements for the relevant assessment year should be checked. The old Act continues to matter for saved rights, liabilities and proceedings even after its repeal.

Official Income Tax resources

For current statutory text and compliance material, use the official Income Tax Department resources:

• Income-tax Act, 2025 and official comparison resources
• Income-tax Act, 2025 - official PDF
• Income-tax Rules, 2026 forms, FAQs and guidance
• Income Tax Act 2025 Help Center
• Legacy Section 80JJAA - official Income Tax Department text

Tax law can depend on the tax year, commencement date, business facts and transitional provisions. Check the law applicable to the relevant period before making a claim.