Union Budget 2016: The existing provisions of Section 80JJAA provide for a deduction of thirty percent of additional wages paid to new regular workmen in a factory for three years. The provisions apply to the business of manufacture of goods in a factory where ‘workmen’ are employed for not less than three hundred days in a previous year. Further, benefits are allowed only if there is an increase of at least ten percent in total number of workmen employed on the last day of the preceding year.

With a view to extend this employment generation incentive to all sectors, it is proposed to provide that the deduction under the said provisions shall be available in respect of cost incurred on any employee whose total emoluments are less than or equal to twenty five thousand rupees per month. No deduction, however, shall be allowed in respect of cost incurred on those employees, for whom the entire contribution under Employees’ Pension Scheme notified in accordance with Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, is paid by the Government.

It is further proposed to relax the norms for minimum number of days of employment in a financial year from 300 days to 240 days and also the condition of ten per cent increase in number of employees every year is proposed to be done away with so that any increase in the number of employees will be eligible for deduction under the provision.

It is also proposed to provide that in the first year of a new business, thirty percent of all emoluments paid or payable to the employees employed during the previous year shall be allowed as deduction.

This amendment will take effect from 1st April, 2017 and will accordingly apply in relation to assessment year 2017-18 and subsequent assessment years.

Clause 44 of Finance Bill 2016

Clause 44 of the Bill seeks to substitute a new section for section 80JJAA of the Income-tax Act relating to deduction in respect of employment of new employees.

The existing section provide for a deduction of thirty per cent. of additional wages paid to the new regular workmen in a factory for three years. The provisions apply to business of manufacture of goods in a factory.

It is proposed to extend the benefit to all assessees who are required to get their accounts audited under section 44AB. Further, it is also proposed to liberalise the eligibility condition relating to minimum number of persons employed and the total number of days for which they must be employed during the year.

Deduction under the proposed provisions will be available in respect of cost incurred on those employees whose total emoluments are less than or equal to twenty-five thousand rupees per month. No deduction, however, shall be allowed in respect of cost incurred on those employees for whom the entire contribution is paid by the Government under the Employees’ Pension Scheme notified in accordance with the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

This amendment will take effect from 1st April, 2017 will, accordingly, apply in relation assessment year 2017-2018 and subsequent years.

[Clause 44]

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