Budget 2018: As jobs remain big headache, govt looks at tax tweaks for fix

One way the government could give job creation a boost is by tweaking taxation laws to provide companies an incentive for hiring

Job creation is one of Modi government's biggest challenges, with the Opposition using what it calls the government's poor performance in this regard as a stick to beat the prime minister's economic policies with. With Budget 2018 less than a month away, and with employment generation reportedly being a key theme this year, one way the government could give job creation a boost is by tweaking taxation laws to provide companies an incentive for hiring.

India already provides tax benefits to incentive's job creation by companies. However, according to a Times of India report, certain lacunae in the rules have kept many companies, particularly from the services sector, from reaping the benefits of such incentives. In view of this, according to the national daily, the government could tweak Section 80JJAA -- which sets out conditions under which a company can avail of deductions in respect of employment of new employees -- of the Income Tax (I-T) Act or introduce some new provision.

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Under the Section, 30 per cent of the additional employee cost is available to the concerned company as a deduction for three years, including the year of hiring the new employee(s). Only companies having a turnover of Rs 10 million or more are eligible to claim benefits for any new employment created by them. The devil, however, is in the details. Among the Section's various conditions under which a new worker is not considered an additional employee, two in particular seem to have negatively impacted job creation, according to the national daily. Firstly, if a person is employed for less than 240 days in the first year of his employment with the concerned company, then he or she is not considered an additional or new employee. Only the textile sector enjoys a lower threshold of 150 days in this regard. Secondly, an employee whose total emoluments are more than Rs 25,000 per month is also not considered an additional employee -- the salary of such an employee is excluded when computing additional employee cost, against which the benefit is available.

What are the possible remedies?

Experts have pointed out the difficulties such conditions pose. Speaking to the national daily, EY India partner & national tax leader Sudhir Kapadia explains that employees hired from August onwards are subject of "significant uncertainty" for the company as they cannot complete the stipulated 240 days in the first year of their employment.

Budget 2018: Modi executive targets disinvestment receipts of Rs 900 billion

The ONGC-HPCL deal is probable to fetch the government Rs three hundred billion, the file stated quoting assets Eyeing Rs 1 trillion Budget 2018 range goal via disinvestment for subsequent economic, the Modi government may also give up FY18 with Rs 900 billion selloff, nearly two times the file parent of Rs 460 billion completed remaining yr, at the returned of its stake sale in Hindustan Petroleum corporation (HPCL) to oil and natural gasoline organization (ONGC), in line with The Time of India document.

The deal is probably to fetch the government Rs three hundred billion, the file stated quoting resources.

The sale of the authorities's stake in HPCL to ONGC is caught on valuation. in step with persons close to the improvement, the effort changed into to shut the deal before the end of this month however the government became searching at getting a better fee for its 51.1 according to cent stake in HPCL.

based at the contemporary market capitalisation, a fifty one in step with cent in HPCL is valued at Rs 323 billion, approximately Rs 23 billion higher than in remaining July while the Union cabinet had cleared the sell-off. however, reviews endorse that once evaluating the marketing network, physical belongings and logo fee of HPCL, the valuation can be around Rs 450 billion.

The cupboard Committee on economic Affairs had given in-principle approval for the strategic sale on July 19 closing 12 months.

The government's non-tax revenue is extremely depending on the deal. As on January 2, overall disinvestment proceeds for 2017-18 stood at Rs 538 billion against the goal of RS 725 billion set via Finance Minister Arun Jaitley. If the ONGC-HPCL deal works out, this may be first time considering the fact that 2009 that the government could be surpassing the disinvestment goal.