Thursday, March 10, 2016

Move to create employment opportunity

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.

Towards this end, the ‪#‎FinanceBill, 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').

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.

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.

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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Our Budget expectations once again come to fruition

Every year 'Taxmann' predicts and suggests various substantive and procedural changes to taxation laws based on judicial litigations, prevalent uncertainties and change in the business environment. We met several expectations for Union Budget 2014-15 and 2015-16 which were published in [2014] 47 120 (Article) and [2015] 61 143 (Article).
This year also we have released our #Budgetexpectations in [2016] 67 45 (Article). It is to our credit that many of our expectations came to fruition in the Union Budget 2016 as well.
The following is a comparative study of the changes suggested by us viz-a-viz changes proposed in the Finance Bill, 2016:

Expectations from Budget 2016-17
  1.  (a) Dividend income and share in profit of a firm should not be treated as exempt income for Section 14A disallowance as these incomes always suffer economic taxation.(b) Section 14A disallowance should not exceed amount of total expenditure claimed under any provision of the Act.
  2. As per section 206AA, where the deductee does not furnish the PAN, tax shall be deducted at source at higher rates. Such provision is also applicable to non-residents.