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 Incometax 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.

Expectations from Budget 20163

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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 @ 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-

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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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