Guidelines for deduction at 150% on expenditure on skill development u/s 35CCD

Income tax department has issued a press release on guidelines for weighted deduction @150% of the expenditure incurred on skill development under section 35CCD of income tax act. Full press release is as under.

Subject: Guidelines for weighted deduction @150% ofthe expenditure incurred on skill development under section 35CCD ofthe Income­taxAct,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 Incometax 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 projectshall be required to maintain separate books of account of the project notified under section 35CCDand getsuch books of account audited.

(6) Itisintended thatthe skill development projectshall provide training to potential employees or newly recruited employees. Skill developmentof 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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