Work From Home Allowed in Special Economic Zone Units

In the year 2020, work from home gained popularity and various sectors in the country were able to shift gears and adopt a total work from home or a hybrid work model. However, companies in Special Economic Zones faced challenges with enabling a work from home structure for their employees due to a lack of uniform guidelines/directions for the same.

Concerns were also raised by certain companies such as the National Association of Software and Service Companies (NASSCOM), regarding the ramifications of a work from home model on the deductions allowed for businesses established in Special Economic Zones under Section 10AA of the Income-Tax Act, 1961. According to Section 10AA, units that have commenced manufacture or production of articles or things or provide services in Special Economic Zones, can avail tax exemptions. A strict interpretation of this Section meant that remote work cannot be considered as having been done from the Special Economic Zone location, thereby making the company ineligible for such tax exemptions.

While units in the Special Economic Zones are still seeking clarifications on the above tax considerations of work from home, the Ministry of Commerce and Industry recently amended the Special Economic Zone Rules, 2006 (“Rules“) vide a notification dated July 14, 2022, which allows employees (including contractual employees) working in a Special Economic Zone unit1 to work from home.

A new rule, Rule 43A has been inserted to the Rules, which provides guidelines for work from home for employees working in Special Economic Zones units. We have discussed the key provisions of the new rule below:

  1. Employees Permitted to Avail Work From Home 

The following employees of a unit may avail the option of working from home or working from any place outside the Special Economic Zone:

  • Employees of the Information Technology and Information Technology enabled services Special Economic Zone units;
  • Employees, who are temporarily incapacitated;
  • Employees, who are travelling; and
  • Employees, who are working offsite.
  1. Submission of Work From Home Proposal

Employers are required to submit a proposal for the work from home structure to the Development Commissioner (through email or physical application), at least 15 days in advance, which contains the terms and conditions of the work from home facility, including (i) the date from which the permission for work from home shall be utilised; and (ii) the details of the employees to be covered by such permission for work from home. The work to be performed by the employee permitted to work from home should be according to the services approved for the unit and related to a project of the unit.

If the employees of a unit are already working from home or from any place outside the Special Economic Zone on July 14th, 2022 (date of commencement of the amendment), a transition period of 90 days to submit its proposal for permission to the Development Commissioner has been provided to units. The Development Commissioner may on receipt of the proposal, grant permission to the proposal for work from home, if he/she is satisfied that all requirements have been met. This permission is only valid for a period of one year from the date of such permission. The employer may apply for an extension of the permission, at least 15 days in advance, which the Development Commissioner may extend for a period of one year at a time.

It is relevant to note that in case of employees who are temporarily incapacitated or travelling, the application for permission for work from home or extension of the permission need not be submitted 15 days in advance.

  1. Restriction on the Number of Employees Allowed to Work From Home

It should be noted that the introduction of this new rule and the option to work from home may be extended only to a maximum of 50% of the total employees of the unit (including contractual employees). However, the Development Commissioner may approve a higher number of employees to work from home for any bona-fide reason if a written request is made by a unit.

  1. Work From Home Infrastructure

The unit is required to maintain accurate attendance record for the entire period of permission for work from home and submit the same to the Development Commissioner, from time to time.

The unit may provide an employee with goods/equipment/facilities including laptops, computers, video projection systems, other electronic equipment and secured connectivity (for virtual private network, virtual desktop infrastructure) for the purpose of work from home. Prior permission of the Specified Officer will be required, to temporarily remove such goods to the domestic tariff area without payment of duty or integrated goods and services tax. The following procedure must be followed for providing such equipment to the employees:

  • The unit shall account for the goods removed temporarily;
  • The unit shall issue a certificate authorising the employee by name and giving the full specifications (serial number, model number and make of the equipment) of the equipment;
  • A copy of the certificate shall be endorsed to the Specified Officer who will provide an acknowledgement for the same; and
  • A record of such certificate of authorisation issued for temporary removal of equipment must be maintained by the unit.

It is relevant to note that the permission to provide the equipment to the employees is co-terminus with the permission for work from home granted to an employee.

With remote work becoming commonplace and most companies having moved to a hybrid model of work, the amendment is a necessary update to the Rules and addresses a long pending demand of the Special Economic Zones across the country2.


2 https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1842710