Fri. Mar 29th, 2024
SMEs (Small and Medium Enterprises)

Ever since the official announcement of Startup India initiative in January 2016, the government has been betting big on young entrepreneurs as well as SMEs (Small and Medium Enterprises). With the initiatives like self certifications and tax free profit in the initial years, the government has finally shown to the youth that someone up there is listening to their problems. The aggressive approach to promote digital transactions is set to reap big benefits for the businesses in the time to come.

Along with all the ongoing initiatives, there were quite a few announcements in the budget which was presented by the union finance minster, Arun Jaitley on February 1st. Some of them are below

  1. Reduction in tax rate for SMEs – SME sector was hit pretty hard by the demonetization move, however, finance ministry has given them a way to cheer. For the SMEs having an annual turnover of upto INR 50 crores, the tax rate has been reduced to 25%, from earlier 30%. This will benefit 96% of Indian companies. Also, for the SMEs with a turnover of less than INR 2 crores, the presumed income will be 6% of the total turnover of the assessee, which was 8% before, provides the receipts and the payments are in the digital mode. This will surely bring a lot more transparency to the account books of SMEs.
  2. Digital Villages – The government has always been keen on making villages more equipped and connected. The latest budget announcement allocated a budget of INR 10,000 crores for connecting over 150,000 villages to high speed broadband and WiFi hotspots. The initiative will help the government to offer low tariff internet and other digital services to the end users in villages. The connectivity of even the remote villages through high speed internet could open a lot more opportunities for entrepreneurs and make villages more knowledgeable and skilled. There could be better health opportunities and better access to the outer world for the rural youth. Along with that, a lot more businesses could be initiated in the villages.
  3. Tax on profit exempted for 3 years out of 7 – Earlier, the startups had an option of asking for tax exemption on profit for 3 years out of the initial 5 years. The same has now been increased to 7 years. The startups can now file for tax exemption in any 3 consecutive years. It will surely boost the confidence and help reduce the burden of startups in the initial stages. However, the exemption is available to the companies registered between April 2016 to March 2019.
  4. Encouragement for India Stack – India Stack, an initiatives which provides services like UPI (Unified Payment Interface), BHIM, eKYC, eSign and DigiLocker has seen a great support from the general public. Digital modes of payment have been well accepted by majority of the population in all sections of the society and finance minister announcing a lot more initiatives to support the digital wave seems a positive sign. The focus is rightly on digital payment as well as lending. Also, removing the extra charges around digital payments, the government can create a flow-based lending system which could help a lot of SMEs and Startups in activities like raising investments etc.
  5. Call Center TDS cut down to 2% – It could very well be the only specific announcement for the IT industry, however, it holds a lot in the store. TDS (Tax Deduction at Source) for all the payments to call centers has been cut down from 10% to 2%. Terming it a landmark decision, NASSCOM stated that the move will make more capital available with call centers and help them expand to tier 2 and tier 3 cities.
  6. CERT Protection for Financial Sector – As the digital transactions increase, there is a threat to the security of the money as well as the information shared. The government of India is finally looking to implement CERT (Computer Emergency Response Team) for financial sector which will work closely with the stakeholders of the financial industry. It is a nodal agency which will respond to the security threats as and when they take place.
  7. Increased budget for electronics manufacturing – Electronics manufacturing is an ever-growing market. In last two years, the government has received over 250 proposals for the same, all of them combined, had investments adding upto 1.26 lakh crores. To support initiatives such as Electronics Development Fund (EDF) and Modified Special Incentive Package Scheme (M-SIPS), the government has allocated INR 745 crores in 2017-18.

By Prithviraj Singh Chauhan

Part time journalist, full-time observer. Editor-in-Chief at The Indian Wire. I cover updates related to business and startups.

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