BANGALORE: In what could be a move to provide added flexibility, the Central Board of Direct Taxes has revised the percentage of existing employees that can be transferred by companies in the IT and ITeS sector to a new SEZ unit, without even losing the tax holiday benefits, as reported by Lubna Kably of TNN.

IT-ITeS companies that have set up a new unit in a special economic zone that is also called SEZ will now be able to transfer existing technical employees, provided they account for not more than 50 percent of the total manpower engaged in software development in the new SEZ unit.

The new norms also clarify that the calculation of manpower ratio for the new SEZ unit in its first year of operation will be considered at the end of the financial year. Therefore, it could be possible for a company to start business operations from its SEZ unit, by transferring a handful of existing employees and later hire new employees, and still meet the numbers.

Punit Shah, co-head, tax at KPMG said, "Many companies operate both of out SEZ and non-SEZ units; thus this option is a welcome flexibility provided to the companies as it recognizes and considers the spirit of new employment generated by the company as a whole, rather than restricting it only to the new SEZ unit."

Additionally, an alternative option has also been provided to companies. If the company is able to show that the net addition of new technical manpower in all units of the company is at least equal to the number that represents 50 percent of the total technical manpower of the new SEZ, the tax holiday benefit will not be denied.
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