What is MSMEs?
MSMEs are Micro, Small and Medium Enterprises engaged is manufacturing and supply of more than 6000 products. Generally, the number of 6000 products includes necessity consumer products such as Milk, Biscuits, packed foods etc. MSMEs play a significant role in the Indian economy, MSMEs immensely contribute almost 8% of the nation’s GDP, around 45% of manufacturing output and 40% of exports. MSMEs are also termed as “Backbone of the nation“.
Government provide support to MSMEs by granting them Collateral free guarantee under Credit Guarantee Scheme for Micro, Small and Medium Enterprises. Support by Indian Government helps MSMEs to expand more, expansion leads to growth and growth will automatically increase employment opportunities in the nation.
What is section 43B of Income Tax Act, 1961?
Section 43B is related to costs permitted as deductions under the heads “Income from Business & Profession” is provided under Section 43B of the Income Tax Act of 2013. Some costs can only be deducted from business income in the year they are paid for in whole, not in the year they become due. The Assessee will be allowed to pay these sums on or before the due date of filing his return of income. The Assessee may present documentation of the payment and can claim deduction in the same year when he files his return of income.
What is Amended under section 43B of Income Tax Act, 1961?
Section 43B of Income Tax Act, 2013 is amended with a new clause (h) in order to provide reliefs made to MSMEs. Section 43B of the Income Tax Act, 2013 provide for any sum paid by the Assessee or Buyer to MSMEs beyond the 45-day time limit which is specified in section 15 of the MSME Development Act. Deduction under section 43B will be allowed only when the payment is actually made to MSMEs.
What are the effects of Amendment under section 43B?
Now in order to avail the deduction while filing Income tax returns, Assessee must check whether actual payment is to MSMEs is made or not. When any Assessee receives goods or services from MSMEs, the Assessee shall make payment on or before the date agreed upon between him and the supplier in respect of such goods or services received by Assessee, however if no agreement is made between the Assessee and the supplier, in such case payment shall be made within 45 days from the date of deemed acceptance.