Quick Summary
A recent alteration in the Income Tax Act, aimed at bolstering small businesses by ensuring timely payments, might have inadvertently deterred potential buyers from engaging with them. Sources familiar with government discussions hint at a possible revision in the Act during the forthcoming FY25 full budget session in July. The proposed adjustment, however, remains shrouded in ambiguity. One insider suggests that Clause H of Section 43B could potentially be eliminated. Another source cautions
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FAQ :
The amendment requires businesses to pay MSMEs within a certain timeframe to claim tax deductions in the same financial year. This has led to concerns that larger companies might avoid dealing with MSMEs to bypass this rule.
Potential revisions to the Income Tax Act are expected to be part of the full budget session in July for FY25.
Sources suggest that Clause H of Section 43B of the Income Tax Act, introduced under the Finance Act of 2023, might be revised or eliminated.
The clause was intended to help MSMEs by ensuring they receive timely payments and alleviating their liquidity challenges.
Buyers could face increased tax liabilities in the fiscal year of delay and potential profit reductions when payment is eventually made.
The MSMED Act defines timely payments as 15 days, extendable up to 45 days through contractual agreements.
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