Companies Allowed To Transfer Manpower To SEZs Without Compromising On Tax Benefits

The Central Board of Direct Taxes (CBDT) has said that now companies can transfer up to 50% of their manpower from existing units to new ones in special economic zones (SEZs) without losing any tax benefits. This follows intense lobbying by the industry.

“It has now been decided that the new transfer or re-deployment of technical manpower from existing unit(s) to a new unit located in SEZ, in the first year of commencement of business, shall not be construed as splitting up or reconstruction of an existing business, provided the number of technical manpower so transferred as at the end of the financial year does not exceed 50% of the total technical manpower actually engaged in development of software or IT enabled products in the new unit,” a CBDT circular said. The earlier limit was 20%.

The CBDT increased the limit following intense lobbying by the industry. The industry had been demanding to enhance the limit in line with the recommendations of the Rangachary Committee, which was constituted to review the taxation of the IT sector.

Welcoming the move, Dinesh Kanabar, deputy CEO, KPMG, said, "It is consistent with the stated policy of the government of removing tax aggression because it specifically provides that past assessments will not be reopened."