Tax benefits of registering as an MSME in India

Tax benefits of registering as an MSME in India - MyEfilings

Small and medium enterprises (SMEs) play a vital role in the Indian economy and are considered to be the backbone of Indian industry. They are responsible for generating employment opportunities and providing a large portion of India’s Gross Domestic Product (GDP). In order to ensure that these enterprises are able to operate in an environment that is conducive to their growth, the Indian Government has created the Micro, Small and Medium Enterprises (MSME) Act, 2006. This Act outlines the procedures and regulations which must be followed by SMEs when registering as an MSME in India.

MSME Classification

Registering as An MSME

The first step that an SME must take in order to become an MSME is to obtain a registration certificate from the Ministry of Micro, Small and Medium Enterprises. This can be done by submitting an application form along with the necessary supporting documents. These documents include an identity proof, such as a PAN card, address proof and documents related to the type of business the SME is involved in. Once the application is approved, the MSME would receive a registration certificate which would be valid for 5 years.

The next step for an SME when registering as an MSME is to obtain a Unique Identification Number (UIN) from the Ministry of Corporate Affairs. The UIN is a unique identification number that is used to identify and track an MSME in the system. This number can be used for various purposes, including filing tax returns and obtaining loans.

The final step in registering as an MSME is to obtain a permanent account number (PAN). This is a 10-digit code that is used to identify an entity in the tax system. It is important to note that a PAN is mandatory for any business that is looking to register as an MSME. Once the PAN has been obtained, the SME must then register with GST network. This registration will enable the SME to pay its GST liabilities and claim any GST credits.

To register as an MSME in India is a simple and straightforward process. By following the above steps, an SME can easily become an MSME and enjoy the various benefits that come with it. These benefits include access to government schemes, tax exemptions and loans.

In India, registration as a Micro, Small and Medium Enterprise (MSME) provides various tax benefits to businesses.

Tax benefits of registering as an MSME in India

MSMEs are eligible for a lower income tax rate of 25% as compared to the higher rate of 30% applicable to other businesses. This helps MSMEs save on taxes and use the additional funds for their business growth.

Exemption from Dividend Distribution Tax:

MSMEs are exempt from paying dividend distribution tax (DDT) on their profits. This helps them save on taxes and reinvest their profits in their businesses.

Reduced GST Rates:

MSMEs are eligible for lower GST rates of up to 12% on their sales as compared to the higher rate of 18% applicable to other businesses. This helps MSMEs save on taxes and use the additional funds for their business growth.

Subsidies and Incentives:

MSMEs are eligible for various government subsidies and incentives such as reduced interest rates on loans, discounted electricity rates, tax holidays, and more. These subsidies and incentives help MSMEs save on costs and reinvest the additional funds in their businesses.

Access to Government Tenders:

MSMEs are eligible for special consideration when bidding for government tenders. This helps them access more business opportunities and increase their profitability.

Government Schemes For MSME’s

Given the role of this sector in the Indian economy, the central government has launched programs to support MSME entrepreneurs together with the RBI. Some notable initiatives are:

  • MSME Samadhaan
  • Udyog Aadhaar
  • ZED program
  • Make In India
  • Stand Up India

With the help of these programs you too can expand your business in this sector and contribute to the economic development of India.

If you are looking to access a larger fund amount, consider the Bajaj Finserv MSME Loan to increase revenue and streamline operations. Whether you are looking to start or expand your SME, this unsecured loan of up to Rs. 50 lakh at a competitive interest rate is the perfect option for your small or medium-sized business.

To solve your liquidity problems, you can use the flexi loan service, which allows you to pay interest only on what you deduct from your total fine. Also, you can only pay EMI on interest throughout the term and only repay the principal at the end. This method helps reduce your EMI by up to 45%, allowing for more effective and efficient working capital management.

Thus, by registering as an MSME, businesses can enjoy various tax benefits and use the additional funds for their business growth. Contact our e-filings expert to understand more.

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