Quick Summary
In a significant development for Micro, Small, and Medium Enterprises (MSMEs), Finance Minister Nirmala Sitharaman announced on Tuesday that the government is open to repealing the recent changes to Section 43B of the Income Tax Act. This consideration comes in response to concerns raised by MSMEs regarding payment timelines from their buyers. Addressing Payment Delays During an interaction with MSMEs and local industries in Ludhiana, Sitharaman acknowledged the challenges faced by small b
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FAQ :
Section 43B of the Income Tax Act, particularly clause (h) introduced recently, relates to the deductibility of expenses for businesses. It stipulated that payments to micro and small enterprises must be made within specific timelines (45 days with agreement, 15 days without) for the expense to be tax-deductible.
MSMEs are concerned because the new 45-day payment rule for tax deductibility disrupts their working capital. Many buyers have payment cycles that extend beyond 45 days, and the stringent rule could lead to business losses if buyers opt for suppliers outside the MSME definition.
Finance Minister Nirmala Sitharaman has stated that the government is open to reverting Section 43B to its original rules if MSMEs are willing to accept delayed payments beyond the 45-day limit.
Reverting to the original rule means removing the 45-day payment deadline for tax deductibility, allowing for more flexible payment timelines between buyers and MSMEs, as was the case before the recent amendments.
Any changes to the rule will be addressed in the full budget session in July, under the new government, based on the representations submitted by MSMEs.
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