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2015-03-03 00:00:00Money & FinanceEnglishThe Union Budget 2015 has just been announced, and it holds many developments, both for the common citizen, the business sector in... Union Budget : Impact on Small Businesses

The Union Budget : Impact on Small Businesses

2 min read

The Union Budget 2015 has just been announced, and it holds many developments, both for the common citizen, the business sector and the startup ecosystem in particular. The Indian government has started recognizing the role of small and medium enterprises and is creating incentives that could benefit your business and help you grow.

Here are the key announcements from the Union Budget 2015 that could have an impact on small businesses:

1. Setting up of the MUDRA Bank:

The Micro Units Development Refinance Agency (MUDRA) is a new initiative to enable small and medium businesses and enterprises get refinancing with a corpus of Rs. 20,000 crore as well as a credit guarantee corpus of Rs 3,000 crore. Many microfinance institutions do not finance small businesses and even when they do, there are not a lot of options for refinancing. MUDRA will help address this issue and will fill a gap in the refinancing structure that has existed so far.

2. Tax rate on royalty and fees for technical services cut:

At the Union Budget 2015, the Finance Minister also announced a significant cut in royalty and fees for technical services, from 25% to 10%. Technology companies have previously spent a lot on fees and royalties paid to entities based abroad. This will reduce the pressure on overseas payments and will also drive technology inflow to small businesses at lower costs.

3. Emphasis on job creation:

The budget speech also referred to the importance of entrepreneurs and small businesses that form the backbone of the Indian economy. The Union Budget 2015 provides the necessary impetus to empower small businesses, and talks about the need to focus on job creators rather than on job seekers.

4. A Rs. 1,000-crore idea for entrepreneurs:

The Finance Minister also talked about creating ‘world-class incubators’ and has allotted Rs. 1,000 crore for entrepreneurship and startups. Though it is unclear as of now as to how he proposes to allocate these funds, it is definitely a welcome move that will help startups and small businesses in the long run.

5. Make in India:

The Make in India initiative is clearly aimed at enhancing opportunities for small and medium Indian businesses to accelerate growth and productivity. In addition, the increased investments in infrastructure and defence will boost the manufacturing industry in India and enable better job creation.

6. Corporate tax reduction:

The reduction of the corporate tax rate from 30% to 25% over the next four years will create an environment conducive for foreign investors to look at India as a favourable investment destination and therefore increase the possibility of investments in the small business/startup sector as well.

The above were some of the most significant highlights from the Union Budget 2015 that will definitely play a role in strengthening the scenario for small businesses in India, and it is clear that the government has created a path for the small business ecosystem to thrive over the next few years.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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