The Indian Budget 2016 included a number of initiatives that would benefit the country’s SMEs. Here’s a look at the initiatives that are aimed to enable businesses to grow. With nearly 40% of exports and 8% of the country’s GDP coming from the Small and Medium Enterprises (SMEs), this segment plays a significant role in the growth of the Indian economy.
The importance of SMEs can further be gauged by the fact that the sector employs about 40% of India’s workforce and contributes about 45% to India’s manufacturing output. The Indian government acknowledged the contribution of this segment to the country’s economy by incorporating key benefits for the SME segment in the economic Budget for the fiscal year 2016-17. These initiatives are aimed to motivate businesses to expand and strengthen their place in the market.
Higher tax exemption limit
One of the most significant proposals of Budget 2016-17 is to offer tax exemptions for small businesses with a turnover of up to Rs 20 million, double that of the previous limit. This measure would further motivate you to expand your business and also invest in modern technologies to become more competitive in the market.
An increase in the tax exemption bracket means businesses can now expand without falling off the tax exemption bracket. Nearly 3.3 million small businesses availed benefits under this scheme in the past financial year and the number is likely to increase with the new exemption brackets.
Reduction in tax rates
In a major move to boost growth and employment in the SME segment, the Budget brought down the corporate income tax rate for companies with a turnover of less than Rs 50 million to 29% plus surcharge and cess, 1% down from the previous year. Start-ups have more reason to cheer, as the Budget promised them a 100% deduction on taxation of profits for any three out of the first five years of the company’s operating period (although the companies still have to pay the Minimum Alternate Tax).
Measures to provide easy access to funds
The Budget increased the amount to be disbursed under the Pradhan Mantri Mudra Yojana from Rs 1,000 billion to Rs 1,800 billion. The scheme was launched with the aim to provide entrepreneurs and existing small businesses with easy access to formal financial resources.
The Budget also allocated Rs 5,000 million to the Stand Up India scheme to encourage entrepreneurship among the scheduled castes, scheduled tribes, and women entrepreneurs. With Budget 2016 providing significant financial advantages to entrepreneurs and owners of small businesses and enterprises, the time is right to take your business to the next level.