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Impact of Section 43B(h) on MSME

Section 43B(h) disallows certain expenses under the Income Tax Act unless the actual payment is made. This clause specifically targets payments to MSMEs, ensuring businesses cannot claim tax deductions for expenses related to MSME supplies unless the payment is cleared within the prescribed timeline.<br><br>

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Impact of Section 43B(h) on MSME

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  1. ET'S gROW yOOUR Impact of Section 43B(h) on MSME

  2. TABLE OF CONTENS INTRODUCTION CONCLUSION ABOUT US CONTACT US UNDERSTANDING SECTION 43B(H) KEY PROVISIONS IMPACT ON MSME

  3. Introduction In India, section 43B(h) of the Income Tax Act, of 1961, was introduced through the Finance Act, of 2023, to provide tax incentives and streamline payments for Micro, Small, and Medium Enterprises (MSMEs). The section aims to support MSMEs for MSME Registrationby encouraging timely payments from businesses that purchase goods or services from them.

  4. About Us UDYAMREGISTRATIONS.CO.IN Website is the Property Of A Consultancy Firm that Provides Consultancy Services. We are a B2B Consulting Firm. We have served more than 2 lac happy and satisfied clients.

  5. Understanding Section 43B(h) Section 43B(h) disallows certain expenses under the Income Tax Act unless the actual payment is made. This clause specifically targets payments to MSMEs, ensuring businesses cannot claim tax deductions for expenses related to MSME supplies unless the payment is cleared within the prescribed timeline.

  6. Key Provisions • Disallowance of Expenses: Under this provision, any business entity that purchases goods or services from an MSME will only be allowed to claim a tax deduction for these purchases if the payment is made to the MSME within the prescribed time. • Payment Timeline: Payments must be made by the buyer to the MSME either: • Within the credit period agreed upon contractually (not exceeding 45 days as per the MSME Act). • If no agreement exists, within 15 days of receipt of goods or services.

  7. Impact on MSME Improved Cash Flow for MSMEs: Timely Payments: By disallowing deductions on payments that have not been made within the prescribed timeline, Section 43B(h) forces businesses to pay their MSME suppliers on time. This helps MSMEs improve their working capital and liquidity, ensuring that they do not face delays in receiving payments. Reduction in Payment Defaults: The MSME sector often faces issues with delayed payments from larger corporations. With the introduction of Section 43B(h), businesses are incentivized to clear their dues promptly to avoid tax penalties.

  8. Strengthened Legal Protection: Section 43B(h) complements the MSME Development Act, 2006, which already provides legal backing for timely payments to MSMEs. The addition of this tax provision strengthens the enforcement of these payment terms. Promotes Compliance: Companies dealing with MSMEs are more likely to adhere to the payment timelines due to the financial implications of delayed payments. This provision encourages large corporations to set up better payment mechanisms for their MSME suppliers. Note: You can also Update Udyam Certificate

  9. Conclusion Section 43B(h) is a positive step for supporting MSMEs by ensuring timely payments and improving cash flow. It helps reduce financial distress for smaller businesses and incentivizes larger companies to comply with fair payment practices. However, companies will need to adjust their payment schedules and enhance their compliance mechanisms to align with this provision.

  10. Contact Us +91 - 9355564608 https://udyamregistrations.co.in/ care@udyamregistrations.co.in

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