Budget 2023 - Encouraging Timely Payments to Micro and Small Enterprises
The Indian government's budget 2023 has a major focus on promoting timely payments to micro and small enterprises. In this regard, the government has proposed an amendment to Section 43B of the Income Tax Act. The amendment is aimed at ensuring that payments made to these enterprises are allowed as deductions only on actual payment.
Section 43B of the Income Tax Act provides for certain deductions to be allowed only when the payment is actually made. The proviso of the section allows the deduction on accrual basis, provided the amount is paid by the due date of furnishing of the return of income. However, in order to ensure timely payments to micro and small enterprises, the government has proposed a new clause (h) to be inserted in Section 43B. The clause provides that any sum payable to a micro or small enterprise beyond the time limit specified in Section 15 of the Micro, Small and Medium Enterprises Development (MSMED) Act 2006 will be allowed as a deduction only on actual payment.
The proposed amendment is in line with Section 15 of the MSMED Act, which mandates payments to micro and small enterprises within the time specified in the written agreement. This time limit cannot be more than 45 days.
If there is no such agreement, the payment must be made within 15 days. Thus, the amendment to Section 43B will allow the payment as a deduction only if it is paid on time, as mandated under Section 15 of the MSMED Act.
This amendment will come into effect from 1st April, 2024 and will apply to the assessment year 2024-25 and subsequent assessment years. The amendment is aimed at encouraging timely payments to micro and small enterprises and promoting the growth of this important sector of the Indian economy.
In conclusion, the government's move to promote timely payments to micro and small enterprises is a positive step towards promoting the growth of this important sector. It is expected to have a positive impact on the overall economy and help small businesses to grow and prosper.