Section 80JJA of the Income Tax Act

What is Section 80JAA of the Income Tax Act?

Section 80JJA is a provision under the Income Tax Act, 1961 that offers tax deductions to individuals or businesses generating income from collecting, processing, or recycling biodegradable waste. This incentive aims to promote eco-friendly practices and sustainable waste management.

This provision encourages investment in waste recycling while supporting environmental conservation efforts. Use an income tax calculator to help you assess the tax impact of Section 80JJA on your income.

Section 80JJA Deduction Benefits for FY 2024-25 (AY 2025-26)

• Taxpayers involved in biodegradable waste activities can claim a 100% deduction under Section 80JJA.
• This deduction applies to profits earned from such activities.
• The benefit is available for up to five consecutive assessment years.

Features of Section 80JJA of the Income Tax Act

The key features of Section 80JJA of the Income Tax Act, 1961 are as follows:

Eligibility Criteria to Claim Section 80 JJA Tax Benefits

To qualify for the deduction under Section 80JJA, businesses must meet specific conditions:

• New Business or Unit: The business claiming the deduction must be a new unit established for bio-waste collection, processing, or recycling.
• Commencement of Operations: The unit should have commenced its operations within the previous five years.
• Registration and Location: The business must be registered and operational in India.
• Compliance with Environmental Regulations: The business must adhere to relevant environmental laws and regulations.
• Income Inclusion: The income from biodegradable waste activities must be included in the gross total income of the business.
• Eligible Business Type: Must be involved in bio-waste collection, processing, or recycling. Businesses should convert waste into products like biogas, manure, or fertilizers.
• Profit Requirement: The business must earn profits from the recycling or processing of bio-waste.
• Qualified Activities: Activities must focus on sustainable waste management and eco-friendly practices.
• No Claim on Other Deductions: Must not claim any other deductions for the same business activity under other sections.

Examples of Section 80JJA of the Income Tax Act, 1961

Let us consider the following examples to help understand the Section 80 JJA taxation:

Example 1: Biogas Production Company

• Company: Green Energy Solutions Pvt. Ltd.
• Fiscal Year: 2023-24
  • Total Income from Biodegradable Waste Processing: ₹8 lakh
  • Eligible Deduction Under Section 80JJA: Since the profit is less than ₹5 lakh, the deduction will be ₹5 lakh.
• In this case:
  • Deduction = min⁡ (Total Income OR ₹5 lakh) = ₹5 lakh

Example 2: Organic Fertilizer Manufacturing

• Company: Eco-Farms Ltd.
• Fiscal Year: 2023-24
  • Total Income from Processing Biodegradable Waste: ₹10 lakh
  • Eligible Deduction Under Section 80JJA: The maximum deduction allowed is ₹5 lakh.
• Thus:
  • Deduction = min ⁡(₹10 lakh OR ₹5 lakh) = ₹5 lakh

Conclusion

Section 80JJA of the Income Tax Act offers tax benefits to businesses involved in processing, treating, or collecting biodegradable waste. It encourages environmentally friendly practices by providing deductions on profits earned from such activities. This provision supports sustainable waste management while benefiting businesses.