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MSME & Sec 43B(h)

The document outlines the classification criteria for Micro, Small, and Medium Enterprises (MSMEs) based on investment and annual turnover, effective from July 1, 2020. It details the registration process through the Udyam Portal, the applicability of Section 43B(h) of the Income Tax Act for payments to MSMEs, and the conditions under which these payments can be deducted. Additionally, it specifies the time limits for payments and the implications for businesses that do not comply with the registration requirements.

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sravani kanigiri
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3 views

MSME & Sec 43B(h)

The document outlines the classification criteria for Micro, Small, and Medium Enterprises (MSMEs) based on investment and annual turnover, effective from July 1, 2020. It details the registration process through the Udyam Portal, the applicability of Section 43B(h) of the Income Tax Act for payments to MSMEs, and the conditions under which these payments can be deducted. Additionally, it specifies the time limits for payments and the implications for businesses that do not comply with the registration requirements.

Uploaded by

sravani kanigiri
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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You are on page 1/ 7

Micro,Small, and Medium Enterprises[MSME's]

Period to Check the Applicability

1.For determining whether a business falls under the MSME classification,


The investment and turnover limits should be considered from the Financial Year 2020-21
onwards.

2. Businesses should assess their investment in plant and machinery/equipment and annual
turnover for the financial year (April 1 to March 31) to determine their classification under the
MSME category.
MSME's get registered in Udyam Portal
MSME Registration is not mandatory even if it applies to the company.
The main reason for most of the companies getting registered under MSME is because of the
benefits
The MSME Classification Criteria based on Investment & Annual T/O became effective from July 1,2
MSME Classification is based on the Investement and Annual Turnover
>For Manufacturing, Trading and Service Sectors etc
Particulars
Investment
Annual Turnover
* Both the Conditions must satisfy in order to fall under one of the above Classification'

The Order Of Prefernce is :


1. Micro (If Micro Enterprises Limits are crossed then it will check the limits of Small Enterprise)
2. Small ( If Small Enterprises Limits are crossed then it will check the limits of Medium
Enterprise)
3. Medium ( If Medium Enterprises Limits are crossed then it comes under 'Other than MSME's'

Definitions:
1. Investment
This refers to the total amount of capital expenditure a business has made on acquiring,
installing, and maintaining its physical assets that are used in the production or provision of
goods and services.
This doesn't include Land and Furniture and Fittings
Note: The Investment in P&M Details shall be linked to/calculated from Previous ITR, otherwise
through self-declaration.
Therefore,WDV of the Assets would be considered and not their original cost.
2. Annual Turnover

Annual turnover is the total revenue generated by the business from its operations over a
financial year.
It includes all sales revenue, income from services provided, and other operating income.
Exports shall be excluded and information shall be linked to Income Tax Returns and GST
Turnover
Exclusions: Capital Investments,Loans and Grants
Turnover is on PAN All India Basis(All the Units are added)
from July 1,2020

Micro Enterprise Small Enterprise Medium Enterprise


Upto 1 Crore Upto 10 Crores Upto 50 Crores
Upto 5 Crore Upto 50 Crores Upto 250 Crores
ssification's
Section 43B(h)
Applicability -
It is Applicable from AY 24-25 (FY 23-24)
It is effective from 1st April,2024.

> Section 43B(h) of the Income Tax Act, effective from Assessment Year 2024-25, addresses the dedu
payments made to Micro and Small Enterprises (MSEs).
> This provision mandates that any sum payable to an MSE beyond the time limit specified in Section
Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, will only be allowed as a dedu
year the actual payment is made.

> So, Any sum which is owed to MSME for the goods supplied or services given by them is eligible to b
the same year , If paid within the stipulated period

> In order to claim the Benefit by MSME's they have to mandatorily get registered under Udyam Porta
> The Supplier ( MSME ) has to mention or Intimate their Udyam Registration Number either on Invoic
Customers.
> In the absence of availability of any info, No Disallowance u/s 43B(h) will be made.

Section 43B(h) is not applicable to Traders & Wholesale Retailers because they are restric
benefit of Priority Lending Sector.
Hence,It is applicable to only Manufacturers and Service Providers
But If a Supplier is engaged in both Trading as well as Manufacturing/Services, Sec 43B(h)
to them.

Section43B(h) covers only Micro and Small Enterprises.


It does not cover Medium Enterprises.
Thus, if payment is not made by 31stMarch of the previous year the outstanding amount d
enterprise is not liable for disallowance.

Time Limits
> If there's a Agreement: The Payment should be made within the Agreed Date or within 45 days w
> If there's no Agreement: The Payment should be made within 15 Days
* Agreement is not defined under MSMED Act,2006(It can be either oral or written agreem
* The Date of 45/15 days will be from the date of Delivery of Goods/Services. So if there's n

If a business opted for presumptive scheme then sec43B is not applicable for them.
Hence, No Disallowance can be made in such cases.

If expenses are booked after March 15 where 15 days period has not expired on 31st marc
Any sum remain payable to micro or small enterprise at year end but paid in next year within the time
under Section 15 of MSMED Act then the same will be allowable in the year of incurrance and if there
the time limit specified in section 15 of the MSMED Act then such payments will be allowed only in the
payment even if payment is made before due date of ITR applicable to the assessee because benefit
to Section 43B(h) is not available in respect of payments to Micro or Small Enterprises.
If there's dispute between buyer and supplier:
From the Date of Acceptance by the Supplier , The payment should be made within 15 days.
ver is earlier

ivery of goods/services then there is no disallowance.


Illustration for your reference
*If Unregistered under UDYAM Portal - Then Mention NA in Udyam Registration Number Column
*Select the Nature of business from the drop down available in the Nature of business column

S.No Name of the CompanUdyam Registration NumberInvestment


1 Naga Sai UDY123456789 500,000,000
2 Sravani UDY123456789 25,800,000
3 Sruthi UDY987654321 10,000,000
4 Sanjana NA 976,500
5 Aijaz UDY234567890 350,000
6 Nikhil UDY876543219 500,000,000
7 Nishita NA 300,000,000
8 Naman UDY345678901 450,000,000
9 Saloni UDY15082003 7,000,000,000
10 Prachi UDY22032003 678,954
11 Tanvi NA 4,570,000,000
12 Vignesh UDY21062004 7,650,000
13 Shambhavi UDY01022002 20,300,000
Registration Number Column
he Nature of business column

Annual Turnover Registration Classification


2,500,000,000 Registered Medium
24,000,000 Registered Small
567,890 Registered Micro
99,500,000 Un-Registered Small
440,000 Registered Micro
12,490,000 Registered Medium
50,000,000 Un-Registered Medium
22,500,000,000 Registered Other than MSMEs
300,000,000,000 Registered Other than MSMEs
250,000,000 Registered Small
500,000,000,000 Un-Registered Other than MSMEs
5,690,438 Registered Micro
235,000 Registered Small
Nature of Business Sec 43B(h) Applicabile or Not
Manufacturing Not applicable
Trading Not applicable
Service Applicable
Manufacturing & Trading Not applicable
Sevice & Trading Applicable
Others Not applicable
Manufacturing & Trading Not applicable
Manufacturing Applicable
Trading Not applicable
Sevice & Trading Applicable
Service Not applicable
Others Not applicable
Trading Not applicable

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