MSME registration in India provides tax benefits such as priority sector lending from banks by govt, MAT credit carryover for 15 years, and more. Read more
Udyam Registration is a free online process for registering micro, small, and medium enterprises (MSMEs) in India. It is a simple and hassle-free process, and it can be done on the Registration portal.
MSMEs that register under the scheme are eligible for a number of benefits, including tax benefits. However, it is important to note that Registration does not automatically entitle an MSME to all tax benefits. MSMEs need to meet certain criteria to be eligible for specific tax benefits.
Tax Benefits Available to Udyam Registered MSMEs
Some of the tax benefits that are available to Udyam-registered MSMEs include:
- Lower tax rates: MSMEs can avail lower tax rates on their income, depending on their turnover and investment. For example, micro-enterprises with a turnover of up to Rs. 5 crore are eligible for a lower tax rate of 5%
- Exemption from MAT: MSMEs are exempt from paying minimum alternate tax (MAT). MAT is a tax that is payable by companies even if they do not have any taxable income
- Deduction for R&D expenses: MSMEs can avail of a deduction of up to 100% on their research and development (R&D) expenses
- Carry forward of losses: MSMEs can carry forward their losses for up to 10 years. This means that they can set off their losses against their future profits
- Set-off of losses from one business against another: MSMEs can set off losses from one business against the profits of another business. This is known as inter-se set-off.
How to Avail Tax Benefits
To avail of tax benefits, MSMEs need to submit a copy of their Registration Certificate to their tax consultant. The tax consultant will then prepare the tax return accordingly.
It is important to note that MSMEs need to meet certain criteria to be eligible for specific tax benefits. For example, to avail the lower tax rate of 5%, micro-enterprises need to have a turnover of up to ₹5 crore.
Other Tax Implications of Udyam Registration
Registration also has some other tax implications. For example, registered MSMEs are required to file their income tax returns on time. They are also required to pay their taxes on time. If a registered MSME fails to file its income tax returns on time or fails to pay its taxes on time, it may be liable to pay penalties.
Important Aspects of Tax Implications of Udyam Registration
- GST: Registered MSMEs are required to register for GST if their annual turnover exceeds ₹40 lahks (₹20 lakh in case of special category states)
- TDS: Registered MSMEs are required to deduct tax at source (TDS) from payments made to certain categories of suppliers, such as contractors, professionals, and employees
- TCS: Registered MSMEs are required to collect tax at source (TCS) from payments made to certain categories of sellers, such as sellers of motor vehicles, scrap, and immovable property
- Compliance: Registered MSMEs are required to comply with all applicable tax laws and regulations. This includes filing regular tax returns and paying taxes on time
Non-Compliance
Udyam-registered MSMEs that fail to comply with applicable tax laws and regulations may be liable to pay penalties and interest. In some cases, they may also be prosecuted.
Conclusion
Udyam Registration is a beneficial process for MSMEs. It entitles them to a number of benefits, including tax benefits. However, it is important to note that Registration does not automatically entitle an MSME to all tax benefits. MSMEs need to meet certain criteria to be eligible for specific tax benefits. Get in touch with our Vakilsearch expert today!
