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Presumptive tax scheme for MSMEs to reduce unreported cash income
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The presumptive tax scheme for MSMEs announced in Union Budget 2023-24 seeks to reduce unreported cash income and increase transparency.
K.V. Srinivasan, Executive Director and CEO at Profectus Capital, said the increased limit on presumptive tax to Rs 3 crore turnover subject to a maximum of 5 per cent cash receipts would provide huge tax relief while enhancing transparency by reducing unreported cash income.
The overall message is, "Be transparent and gain a tax advantage".
"The Budget has provided a significant boost to the MSME sector. Measures such as significant enhancement of credit guarantee scheme with the potential to give Rs 2 trillion additional loans, discouraging delayed payment to MSME vendors, and proposal to enhance the supply of skilled workforce to MSMEs would improve the competitive position of MSMEs significantly," Srinivasan said.
Finance Minister Nirmala Sitharaman on Wednesday announced that the revamped credit guarantee scheme for MSMEs, proposed in the previous Budget, will take effect from April 1, 2023 through infusion of Rs 9000 crore in the corpus.
"This will enable additional collateral-free guaranteed credit of Rs 2 lakh crore. Further, the cost of credit will be reduced by about 1 per cent," she said in her Budget speech.
Aiming to provide relief to MSMEs, the Finance Minister proposed that in cases of failure by MSMEs to execute contracts during the Covid period, 95 per cent of the forfeited amount relating to bid or performance security will be returned to them by the government and government undertakings.
To settle contractual disputes of government and government undertakings, wherein an arbitral award is under challenge in a court, a voluntary settlement scheme with standardised terms will be introduced. This will be done by offering graded settlement terms depending on pendency level of the dispute.
Stating that MSMEs are growth engines of our economy, the Finance Minister said that micro enterprises with a turnover of up to Rs 2 crore and certain professionals with a turnover of up to Rs 50 lakh can avail the benefit of presumptive taxation.
Sitharaman also proposed to provide enhanced limits of Rs 3 crore and Rs 75 lakh, respectively, to the tax payers whose cash receipts are not more than 5 per cent.
