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India Budget Series

TAX INCENTIVE FOR EMPLOYMENT GENERATION

The existing provision of Section 80JJAA provides for deduction of 30% additional wages paid to the new regular workmen employed by an Indian Company only in the manufacturing sector, for the period of 3 years. The minimum number of days of employment in the financial year is 300 days. Further, deduction is allowed only if the number of employees is increased by 10% every year

It is proposed to amend the said Section as follows:

– The deduction shall be allowed to all sectors.

– Deduction shall be allowed in respect of cost incurred on any employee, whose wages are less than or equal to Rs.25,000 per month. However, no deduction shall be allowed of cost incurred on the employees, for whom the entire contribution under EPS is paid by the Government.

– Deduction shall be allowed in respect of employees who do not participate in recognised provident fund.

– The minimum number of days of employment in the financial year shall be reduced from 300 days to 240 days.

– There is no requirement of 10% increase in employees every year for the purpose of deduction.

– Further, in the 1st year of business, 30% of all emoluments paid/payable to employees employed during the previous year shall be allowed as a deduction.

The proposed amendment has been extended to all sectors liberally with a dual focus of encouraging entrepreneurs as well as employment.

These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years

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