Government Proposes Comprehensive Tax Benefits to Align Skilling with Formal Education in New Budget
Share
NEW DELHI: Tax benefits for skilling that the national skill development corporation has recommended in the budget should be on par with that of formal education.
What probably comes as a shot in the arm for the country’s skill development initiatives is the suggestion by the National Skill Development Corporation with regard to a host of tax benefits in the upcoming budget. The measures would equate bilateral skilling accredited with formal education, making it more accessible and affordable. Proposals sent to the finance ministry include a raft of tax incentives and exemptions that benefit both individuals and institutions involved in the exercise of skill development.
Proposed Tax Benefits and Deductions
NSDC has proposed an out-and-out package of tax benefits, which is as follows:
• Deductions on Tuition Fees and Loan Interest: This new provision would make tuition fees for skill training programs eligible for deductions and also permit deductions of the interest paid on loans taken by students for vocational and skill development training.
• Scholarship Exemptions: Incomes by way of scholarships awarded to persons for skill development courses will now be exempt from taxes. It would encourage more of them to pursue such opportunities.
• Lower Tax Rates for Skilling Institutions: The for-profit skilling institutions will have lower taxation, which shall help them spend less on operations and provide relevant, quality training at reasonable prices.
• Tax Exemptions for Educational Institutions: All existing educational institutions running skilling programs will become eligible for tax exemptions available under the present regime to trusts and not-for-profit universities.
• Enhanced Deductions for Skilling Expenditures: It is proposed to offer enhanced tax deductions to businesses and organizations investing in skilling programs against their expenditure.
• GST Regime Changes: Changes to the GST regime are proposed in order to alleviate a substantial part of their financial burden on Skilling Institutions, so as to make it viable to survive and expand.
Explaining ‘Education’ to include Skill Development
A step to integrate skill development with the formal education system, NSDC has suggested that the direct tax laws be amended to define explicitly ‘education’. Only if this comes under the same umbrella as regular education will such institutes come under exemptions and benefits otherwise extended.
This, according to a NSDC official, will “enable institutional functioning at lower cost, reduction of cost of the programmes, improvement in quality and access.”
Donations, People’s Participation to Come Up:
It also proposes to extend the eligibility of claimed deductions for contributions made toward skill training institutes. This, in its entirety, would attract more inflows toward skill development programs and help in expanding the skill cover.
Further, with a view to extending financial support to persons who want to upskill or reskill, the NSDC has suggested that the government should extend tax deductions to interest on loans availment towards vocational and skill development training. This, it is expected that, would incentivize more participation all over the country in its skilling schemes.
Alignment of Skilling with Formal Education
The skilling body, along with the skill development ministry, has mentioned that just as the focus of the government to education—through various incentives and exemptions—has led to a huge difference in the literacy rate of the country, such support percolation in the case of skill development might bring in a same transformation.
“These changes are to make the skilling process at par with formal education. Huge tax benefits and other incentives will be available to the institutions working in the area of skilling that will help make skilling quite affordable and accessible,” says a senior NSDC official.
Income Tax Exemptions and Reduced Tax Rates
Authorities Not-for-profit universities and other educational institutions are already exempt under the promised provisions. Following their example, the NSDC has sought income tax exemption for skill training centers. With this exemption, such training centers would be able to grow and spread; therefore, training would then be available at reduced prices.
The NSDC is of the view that a further tax incentive in the form of lower taxation for fresh entrants or new training centers will spur growth in the skill development sector. Besides this, more number of initiation of training centers will increase the availability as well as access to skill development programs in the country.
Conclusion
The proposed tax benefits and exemptions brought forward by NSDC are an integrated effort toward linking skill development with formal education. Skill development programs, being more accessible, more affordable, and of higher quality, these fiscal measures—the financial incentives and reduced operational costs for the institutions imparting skilling—are bound to make a difference in the nation’s capacity to upskill its workforce.
