Ease of doing business for MSMEs: Among tax benefits for MSMEs announced in the budget, finance minister Nirmala Sitharaman on Wednesday enhanced the turnover limits to be eligible for presumptive taxation. Now micro enterprises with a turnover up to Rs 3 crore from earlier Rs 2 crore and certain professionals with a turnover up to Rs 75 lakh from earlier Rs 50 lakh will be eligible to be taxed presumptively provided their cash receipts are not more than 5 per cent of total receipts.
Under presumptive taxation, small businesses and professionals are not required to maintain their books of account and get their accounts audited, providing relief from tedious tax filing exercises. As per the Income-tax Act, businesses are otherwise required to maintain their books. A micro unit or a professional opting for presumptive taxation can declare income at a prescribed rate.
Receipts are written records of payments made in exchange for goods or services.
“Micro enterprises being over 99 per cent of MSME space, it will help the micro entrepreneurs raise their financial wellbeing,” Alok Misra, CEO & Director of the association for microfinance sector MFIN told FE Aspire.
Moreover, to support MSMEs in the timely receipt of payments, Sitharaman also proposed the deduction for expenditure incurred on payments made to them only when payment is actually made. “This means buyers cannot claim a deduction without first paying MSMEs. It will force them to pay in time,” MSME association FISME said.
Also read: Budget 2023: Key announcements by FM Nirmala Sitharaman for MSMEs
Manish Lunia, Co-Founder of MSME loan provider Flexiloans.com told FE Aspire that enhancing presumptive taxation limits and recognition of expenditure as they occur will improve compliance further for MSMEs and reduce the time and cost for it, bringing more MSMEs to the formal sector.
Among other key announcements, Sitharaman also announced an infusion of Rs 9,000 crore into the credit guarantee scheme under the MSME ministry and SIDBI’s CGTMSE programme. Importantly, the announcement for this infusion was made in the last year’s budget to enable additional collateral-free credit of Rs 2 lakh crore to MSMEs and reduce the cost of credit by 1 per cent.
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