India Regulatory Brief: Maternity Leave to Increase to 26 Weeks and New FDI Rules for Non-Banking Finance Companies

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Maternity Leave to Increase to 26 Weeks for Working Women in the Organized Sector

The Maternity Benefit (Amendment) Bill, 2016 was passed in India’s upper house of parliament on August 11. It will be applicable to female workers in the formal sector, in all establishments employing 10 or more people. A notable feature of the amended Maternity Benefit Bill is the increase in maternity leave for working women from 12 weeks to 26 weeks. This leave can now be availed before eight weeks from the date of expected delivery, instead of six weeks as was the case previously. However, in case of a woman with two or more children, the maternity benefit will continue to be 12 weeks, which cannot be availed before six weeks from the date of the expected delivery.

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Other new provisions include 12 weeks of maternity leave for “commissioning and adopting mothers”. A commissioning mother is defined as a biological mother who uses her egg to create an embryo implanted in another woman. Further, the bill makes it mandatory for an establishment to provide a crèche (childcare) facility, where the number of workers is 50 and above.

The bill must now be approved by the lower house of parliament before it turns into an Act of law after getting signed by the President. This is not expected to be an obstacle as the ruling government holds a party majority in the lower house. However, a key challenge for India’s government is to introduce maternity welfare provisions for women in the informal or unorganized sector, which employs around 100 million women. In its current form, the bill applies to only about 180,000 women who are employed in the organized sector.

Union Cabinet Approves Liberalization of FDI Norms for NBFCs

The Union cabinet approved the liberalization of foreign investment (FDI) norms for non-banking finance companies (NBFCs) on August 10. The measure aims to improve the ease of doing business in the sector and will boost the country’s burgeoning fintech startups as well.

According to the new norms, foreign investment in NBFCs will come under the automatic route if they are regulated by financial sector regulators. Those entities that are not regulated will need approval from the Foreign Investment Promotion Board (FIPB) to secure FDI. The cabinet has also cleared with the earlier provision of minimum capital requirements for NBFCs, as they are already imposed by regulators.

The ease in investment norms for NBFCs was first introduced in Finance Minister Arun Jaitely’s budget speech for the current fiscal year. If formalized, the new rules would expand the number of NBFC activities allowed under the automatic investment route, from the present restriction of 18 specified areas.

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No Capital Gains Tax for Demerged PSUs, Customs Duty Raised to 40% on Marble and Granite, and Tax Sops for Textile Sector

The lower house of India’s parliament passed the Taxation Laws (Amendment) Bill, 2016 on August 9, which will amend aspects of The Income Tax Act, 1961 and The Customs Tariffs Act, 1975.

With respect to implications for The Income Tax Act, The Taxation Laws Bill seeks to exempt the land holdings of erstwhile public sector undertakings (PSUs) from the levy of capital gains tax, when transferred to the government and/or privatized. Next, the bill reduces the criterion of 240 days to 150 days of required annual employment in the textile sector, for businesses to deduct an additional 30 percent of the employee costs incurred for tax purposes, as entailed under The Income Tax Act, 1961. The amendment comes in the wake of a series of corrective measures and legislative policies by the government to revitalize the textiles and apparel sector.

Finally, the bill amends The Customs Tariffs Act in order to increase the upper limit of customs duty on marble and granite to 40 percent from 10 percent to protect the domestic industry from the onslaught of cheap imports.


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