Move to create employment opportunity

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Move to create employment opportunity
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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.

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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 _at_
  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)

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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.
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