In a significant move to bolster micro and small enterprises (MSEs), the Central Board of Direct Taxes (CBDT) has issued Notification No. 128/2024, dated December 18, 2024. The notification provides that no Tax Deducted at Source (TDS) shall be applied to payments received by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). This exemption falls under the purview of sub-section (1F) of Section 197A of the Income-tax Act, 1961.
Key Highlights
- Scope of Exemption: Payments to CGTMSE are now excluded from TDS under Chapter XVII of the Income-tax Act, aligning with clause (46B) of Section 10 of the Act.
- Objective: The measure aims to reduce compliance burdens and provide liquidity to micro and small enterprises, ensuring smoother access to credit guarantee schemes.
- Effective Date: This exemption takes effect from the date of the notification’s publication in the Official Gazette, December 18, 2024.
Implications for MSEs
The notification reaffirms the government’s commitment to strengthening the MSE sector, a vital pillar of the Indian economy. By eliminating TDS on CGTMSE payments, the move is expected to enhance operational efficiency and financial stability for businesses availing of credit guarantee schemes.
This development is seen as part of the broader agenda to simplify taxation and promote ease of doing business in India.
Official copy of the circular has been attached
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