Budget 2023: From MSMEs, professionals to new co-operatives, 5 key changes in tax structure
3 min read . Updated: 01 Feb 2023, 01:17 PM IST
Premium- FM extended the limit for MSMEs and professionals to avail presumptive taxation. While new co-operatives can enjoy the benefit of lower tax rate of 15%. Also, the FM increased cash deposits limit. Meanwhile, startups get boost to extend the date of incorporation for IT benefits.
Finance Minister Nirmala Sitharaman on Wednesday announced a slew of tax benefits to corporates and professionals during the Budget 2023 speech. She extended the limit for MSMEs and professionals to avail presumptive taxation. While new co-operatives can enjoy the benefit of lower tax rate of 15%. Also, the FM increased cash deposits limit. Meanwhile, startups get boost to extend the date of incorporation for IT benefits.
1. MSMEs and Professionals:
FM said, MSMEs are growth engines of our economy. Micro enterprises with turnover up to ₹2 crore and certain professionals with turnover of up to ₹50 lakh can avail the benefit of presumptive taxation. I propose to provide enhanced limits of ₹3 crore and ₹75 lakh respectively, to the tax payers whose cash receipts are no more than 5%."
Moreover, she said, " to support MSMEs in timely receipt of payments, I propose to allow deduction for expenditure incurred on payments made to them only when payment is actually made."
2. New co-operatives:
Sitharaman announced that new new co-operatives that commence manufacturing activities till March 31, 2024, shall get the benefit of a lower tax rate of 15%, as is presently available to new manufacturing companies.
3. Sugar co-operatives:
FM further proposed to provide an opportunity to sugar co-operatives to claim payments made to sugarcane farmers for the period prior to assessment year 2016-17 as expenditure. This is expected to provide them with a relief of almost ₹10,000 crore.
4. Cash deposits:
Also, the FM has announced to provide a higher limit of ₹2 lakh per member for cash deposits to and loans in cash by Primary Agricultural Co-operative Societies (PACS) and Primary Co-operative Agriculture and Rural Development Banks (PCARDBs).
Similarly, she said, a higher limit of ₹3 crore for TDS on cash withdrawal is being provided to co-operative societies.
5. Startups:
Entrepreneurship is vital for a country’s economic development, FM said, while adding, "We have taken a number of measures for start-ups and they have borne results. India is now the third largest ecosystem for start-ups globally, and ranks second in innovation quality among middle-income countries."
Thereby, she proposed to extend the date of incorporation for income tax benefits to start-ups from March 31, 2023 to March 31, 2024. She further proposed to provide the benefit of carry forward of losses on change of shareholding of start-ups from seven years of incorporation to ten years.
How does these corporates benefit from the latest tax benefits:
Manish Lunia, Co-Founder of Flexiloans.com said, "The Budget 23 is a balanced budget that continues to focus on Digitization, Capex spending, Trust based governance and Optimizing the tax structure for the citizens of the country, while maintaining good quality fiscal prudence."
According to Lunia, overall- a pragmatic and fairly inclusive budget for the MSME/ Fintech sector. Here's how!
- Simplicity and standardization of KYCs/ common business identifier via Digilocker - will reduce compliance cost and enhance speed for all stakeholders
- Credit Guarantee for MSMEs of ₹9000 crore will aid enhanced credit to MSMEs with a multiplier effect of upto Rs. 2 lakh crores, while reducing the cost of credit
- Presumptive taxation for MSMEs with enhanced limits to ₹3 crore, 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
- Startups get to extend the date of incorporation for IT benefits till March 31, 2024. Benefit of carry forward of losses on change of shareholding to 10 years of incorporation is also welcome. Reducing of income tax slabs will help employees and increase disposable consumable income
