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Lok Sabha clears Taxation Laws (Amendment) Bill, 2016

Lok Sabha clears Taxation Laws (Amendment) Bill, 2016

The Lok Sabha on Wednesday passed the Taxation Laws (Amendment) Bill, 2016 paving way for employers in the textile sector to avail of the income tax benefit on additional employment provided the employee has worked for 150 days and not 240 days as mandated earlier. The bill will now be taken up by Rajya Sabha following which the changes will be notified.

Union Cabinet had on June 22 approved a special package for employment generation and promotion of exports in textile and apparel sector, in line with its commitment to generate one crore jobs in the textile and apparel industry over next three years.

One of six incentives announced included enhancing the scope of Section 80JJAA of Income Tax Act. “Looking at the seasonal nature of garment industry, the provision of 240 days under Section 80JJAA of Income Tax Act would be relaxed to 150 days for garment industry,” the Cabinet had said.

Section 80JJAA of the Income-tax Act, 1961, was substituted by the Finance Act, 2016, so as to provide that in the case of certain assessees, in computing profits and gains derived from business, deduction shall be allowed of an amount equal to 30% of additional employee cost incurred in the course of such business in the previous year for the specified period, subject to the fulfillment of certain specified conditions.

One of the conditions provides that the employee should be employed for a period of not less than 240 days during the previous year. “In view of the seasonal nature of the business of manufacturing of apparel, there is a need to reduce the period of employment of an employee who is employed in this business from 240 days to 150 days during the previous year,” the government said.

“Indian garments are all summer garments. We are not a great exporter of woolen garments. Therefore nature of this trade in itself is seasonal. Therefore, if we were to cover up for this tax handicap we will have to give our companies some tax incentive to help them be competitive,” finance minister Arun Jaitley said in his reply in the Lok Sabha after the discussion.

Earlier this week, labour ministry had notified the fixed-term employment for the textile sector.


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