Press Release, dated 18.07.2013
Guidelines for
Weighted Deduction @ 150% of the Expenditure Incurred on Skill Development
under Section 35CCD of the Income-Tax Act, 1961
The National
Manufacturing Policy (NMP), 2011 proposed to provide inter alia, the
following direct taxes incentives to promote skill development:
“Weighted deduction of 150% of the
expenditure (other than land or building) incurred in Public Private
Partnership (PPP) projects for skill development in manufacturing sector in
separate facilities in coordination with National Skill Development Corporation
(NSDC).”
2. As a follow up of NMP, Finance Act,
2012 inserted a new Section 35CCD in the Income-tax Act, 1961(‘the Act’) which
provides that for computing business income, a company shall be allowed a
weighted deduction of 150% of expenses (other than land or building) incurred
on skill development project notified by the Board in accordance with the guidelines
as may be prescribed.
3. The guidelines for approval of skill
development project are prescribed in new Rules 6AAF, 6AAG and 6AAH inserted in
the Income-tax Rules, 1962 by Notification No. S.O.2166 (E) dated 15th
July, 2013. The salient features of the guidelines are as under:
(1) A company
engaged in the business of manufacturing any article or thing (other than alcoholic
spirits and tobacco products) or engaged in providing specified services, as
listed under Rule 6AAH, shall be eligible for weighted deduction of the
expenditure incurred on skill development.
(2)The project
should be undertaken in separate facilities in a training institute set up by
the Central or State Government or a local authority or a training institute
affiliated to National Council for Vocational Training (NCVT) or State Council
for Vocational Training (SCVT). Besides Government training institutes, private
sector training institutes affiliated to NCVT or SCVT shall also be eligible.
(3)National
Skill Development Agency (NSDA) shall be the nodal agency to scrutinize the applications
made by eligible companies in Form No. 3CQ. The Central Board of Direct Taxes (CBDT)
shall notify the skill development project based on the recommendation of NSDA
in this regard.
(4) All expenses
(not being expenditure in the nature of cost of any land or building), incurred
wholly and exclusively for undertaking a notified skill development project
shall be eligible for deduction under section 35CCD,except the expenditure
which is reimbursed or reimbursable to the company by any person, whether
directly or indirectly.
(5) The company
undertaking skill development project shall be required to maintain separate books
of account of the project notified under section 35CCD and get such books of
account audited.
(6) It is
intended that the skill development project shall provide training to potential
employees or newly recruited employees. Skill development of existing employees
of the company shall not be eligible for notification under section 35CCD, if
the training of such employees commences after six months of their recruitment.
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