Deduction for employment of new workmen

[Admin TMI]

Question - What are the proposed in Finance Bill 2015 in section 80JJAA to encourage generation of employment ?

[Admin TMI]

Deduction for employment of new workmen

The existing provisions contained in section 80JJAA of the Act, inter alia, provide for deduction to an Indian company, deriving profits from manufacture of goods in a factory. The quantum of deduction allowed is equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in such factory, in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided.

Clause (a) of sub-section (2), inter alia, provides that no deduction under sub-section (1) shall be available if the factory is hived off or transferred from another existing entity or acquired by the assessee company as a result of amalgamation with another company. Explanation to the section defines “Additional wages” to mean the wages paid to the new regular workmen in excess of hundred workmen employed during the previous year.

With a view to encourage generation of employment, it is proposed to amend the section so as to extend the benefit to all assessees having manufacturing units rather than restricting it to corporate assessees only. Further, in order to enable the smaller units to claim this incentive, it is proposed to extend the benefit under the section to units employing even 50 instead of 100 regular workmen.

Accordingly, it is proposed to amend sub-section (1) of the aforesaid section. It is also proposed to amend clause (i) of the Explanation so as to provide “additional wages” to mean the wages paid to the new regular workmen in excess of fifty workmen employed during the previous year.

These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

AI Summary

Deduction for employment of new workmen extended to all manufacturers and threshold lowered to aid smaller units. The deduction equals thirty per cent of additional wages paid to new regular workmen by a manufacturing unit for a three year period. The Finance Bill proposes to extend this deduction to all assessees with manufacturing units (not just companies) and to lower the base threshold for computing 'additional wages' so smaller units can claim the incentive. Existing exclusions for hived off or transferred factories and acquisitions by amalgamation remain. The amendments are prospective and apply from the designated fiscal year onwards.