As an engine of inclusive growth, the MSME sector forms the backbone of the Indian economy. Clearly, it is critical to ensure sustainable economic development at the grass root level – and this aspect has been well addressed in this year’s Budget. Further, against the backdrop of demonetisation, this Budget offers a much needed relief while maintaining a fine balance between expectations and reality.
From a sectoral perspective, Budget 2017 was important for the MSME segment. The finance minister has done a stellar job through the following four key enablers, which will prove to be game-changers for the sector:
1. Incremental tax benefits for MSMEs
Undoubtedly, the government’s focus on promoting the MSME sector is reflected through in the incremental tax reduction of 5 percent for companies with annual turnover of less than Rs 50 core (and with profits less than Rs 1 crore). This, in turn will nudge the MSME segment to increasingly shift from proprietary/partnership firms to company structure, thereby improving the financial discipline. Furthermore, for entities with a turnover of up to Rs 2 crore, relaxation in audit norms through returns to be filed based on presumptive income, will have an extremely positive impact and ensure reduced compliance costs for financial reporting.
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