Budget Special: Service sector cos to get tax incentives for job

BENEFITS LIKELY TO BE IN PROPORTION TO THE NUMBER OF JOBS CREATED

EMPLOYMENT generating companies in the service sector are likely to get a boost in the forthcoming Budget in the form of tax incentives. This can be through a tax benefit, which will be in proportion to the number of new jobs created by companies, said an official with the income-tax department.
At present, the manufacturing sector gets a tax incentive for all additional jobs it creates every year. The government now wants to spread the benefit to companies in the service sector, too. The incentive, currently, is a deduction of 30% of the amount paid as wages to newly-recruited regular workmen. These incentives are provided for the manufacturing sector under Section 80 JJ AA of the I-T Act.

Under the provision, companies are allowed to claim a deduction for three years subsequent to the appointment of 100 or more new workmen. The government's proposal is similar to incentive structures that some of the EU countries have. While a tax incentive linked to employment can be misused, the benefits, it's perceived, may be far reaching. Advocates of such an incentive argue that a higher employment generation creates a virtuous cycle through greater demand, which in turn pushes up a country's national income. The service sector accounted for 52.4% of the total GDP in 2006-07 at current prices. Estimates are that the share has increased to around 54% for 2008-09. In recent years, telecom firms, BPOs and financial services company have emerged as big employers in the country.
The sector, according to the government's definition, is categorised as : (a) Trade, hotels, transport and communication; (b) Financing, insurance, real estate and business services; and (c) Community, social and personal services. Of this, 'trade, hotels, transport and communications' generate half the income in the service sector.

SOP OPERA
The manufacturing sector gets tax incentives for all additional jobs it creates every year
The government now wants to spread the benefit to firms in the service sector also
Currently, the incentive is a deduction of 30% of the amount paid as wages to newlyrecruited regular workmen