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Move to create employment opportunity

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Considering the growth of the economy, the expectation from the Government in the current year's ‪#budget‬ was to create more employment opportunities in various sectors such as infrastructure, manufacturing, etc., thereby, resulting in generation of income.

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Move to create employment opportunity

  1. 1. Move to create employment opportunity
  2. 2. 2 1. Considering the growth of the economy, the expectation from the Government in the current year's budget was to create more employment opportunities in various sectors such as infrastructure, manufacturing, etc., thereby, resulting in generation of income. 2. Towards this end, the Finance Bill, 2016,has proposed to incentivize the employers by expanding and liberalising the scope of employment generation incentive available under Section 80JJAA of the Income-tax Act, 1961 ('the Act'). 3. Prior to the proposed amendment, benefit under Section 80JJAA of the Act was available only to employers engaged in the manufacture of goods, subject to the fulfilment of specified conditions such as new regular workmen employed during the previous year in excess of 50 workmen for an existing factory, increase in the number of regular workmen must be by atleast 10% of the existing number of workmen as on the last day of the preceding year. 4. There has been litigation in the recent past on whether the deduction would be available only to manufacturing sector or would other sectors also be eligible for the same There has been a Tribunal decision wherein, it has been held that even an IT and ITeS Company would be eligible to claim deduction under Section 80JJAA of the Act. 5. Addressing the above issue and also for generating new employment opportunities, the Finance Minister has proposed to amend the eligibility criteria for deduction under Section 80JJAA of the Act, thereby widening the scope to include all assessees liable to tax audit and not only those engaged in the manufacturing activity.
  3. 3. Expectations from Budget 2016-17 The proposed amendment provides for relaxation of certain conditions, which are as under – • Minimum increase in the number of employees – recruitment of even a single eligible employee would enable the assessee to claim deduction @ 30% of the additional employee cost; • In case of first year of the new business, emoluments paid / payable to the employees during the year would be regarded as additional employee cost and be eligible for deduction under Section 80JJAA of the Act; and • The number of days for which the employees are required to be employed during the previous year has been reduced to 240 days from current requirement of 300 days. Having said the above, following are the additional conditions which is proposed to be inserted by the Finance Bill, 2016, in order to avail deduction under section 80JJAA of the Act – • Business should not be formed by splitting up or reconstruction of an existing business or a business re-organization (however business is re-established, reconstructed or revived within the specified period as per the provisions of rehabilitation allowance, then the said re-established, reconstructed or revived shall not be regarded as splitting up or reconstruction of an existing business or a business re-organization); 3
  4. 4. 4 • Mode of payment of emoluments to the additional employees employed during the previous year should be either through account payee cheque, account payee bank draft or by use of electronic mode; • Total emolument of an employee per month should be less than INR 25,000/- ; • Employees entire contribution should not be paid by the Government under the Employees' Pension Scheme; and • Employees to participate in the Recognized Provident Fund. This is a welcome proposal, considering the efforts of the Government to create employment opportunities and also to incentivize employers for the same. However, in order to avail the deduction under Section 80JJAA of the Act, assessees would have to fulfil the prescribed conditions and substantiate the said claim before the revenue authorities.
  5. 5. 5 To read more, please click here

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