India at the centrestage of global investments

Current Environment

Monetisation of various assets by the government, including the railways and roads, airports, oil and gas sector, was the highlight of FY21. It is expected that during the next year as well the government will continue to focus on these areas and include more industries from the Energy, Resource & Industrials (ERI) sector in this monetisation list, which will provide money for other key infrastructure development projects. Last year the government had also introduced production linked incentive (PLI) schemes to incentivise manufacturing in India. Introduction of PLI incentives for other ERI sectors such as the railways, airports, etc., manufacturers and exporters would promote Make-in-India initiative and accelerate the infrastructure growth.

Expectations - Top three asks

1. Provide a consolidated or group taxation regime for the infrastructure sector:

Either of the below approaches should be adopted to boost the infrastructure sector and to address inefficiencies, administrative challenges, and compliance burden:

- Consolidated Group Tax filing approach – The Group of wholly-owned or majority-owned companies, treated as a single entity for taxation purposes and intra-group transactions, is ignored for return filing purpose.

- Group taxation approach - The offsetting of losses incurred by one or more group companies should be allowed against the profits of other companies in the group.

2. Inclusion of power sector, railway redevelopment or airport redevelopment as specified business for the purpose of section 35AD

- Power sector is currently excluded from specified businesses u/s 35AD and there is no clarity on redevelopment projects for railways and airports, to be considered as new infrastructure facility.

- Power projects, railway redevelopment projects, and airport redevelopment projects have always been capital intensive. Inclusion, setting-up and operating renewable power plants, and redevelopment of railways and airports under the concession agreement, should be included under the definition of the term “specified business” for the purpose of section 35AD.

- Assessee engaged in developing or operating and maintaining or developing, operating and maintaining any power generation facility or railway redevelopment or airport redevelopment project should be covered either as a specified business or within the meaning of infrastructure facility.

3. Increase wage limit for new employee deduction (section 80JJAA) for employees in manufacturing and mining sector

- Currently, 80JJAA deduction is available for new employees with monthly salary of less than INR 25,000.

- Per the Code on Wages 2019, there is an increase in the minimum wages payable. Further, the definition of an employee includes managerial and administrative persons. Therefore, as managerial persons are included under the ambit of employees, the limit of INR 25,000 per month may not be in line with the industry standards.

- In view of the above, the cap with respect to salary, i.e., INR 25,000 prescribed u/s 80JJAA for claiming deduction will limit the company’s ability to claim deductions in respect of additional employees that have been added.

- Any increment in the aforesaid ceiling will enable the enterprise to claim weighted deduction, thereby, enabling incremental cash flow and boost in employment generation.