Author: capitalca@123

I believe there are four ways in which assets can be transferred—by a simple transfer during one’s lifetime, through a gift deed, by writing a will, and if a person dies intestate. Which of these methods attracts the minimum stamp duty, particularly for immovable property? Rajat Dutta, Founder & Initiator, Inheritance Needs Services: Stamp duty varies according to the state and is charged as a percentage of the property's value, either as declared in the agreement or based on rates set by the government. The transfer of immovable assets during one's lifetime can be done through sale, gift, family settlement, or partition of an HUF. Sale deed/agreement: Stamp duty is based on the property's circle rate and varies according to the buyer's gender. In the NCR region, men pay 6%, women 4%, and for joint ownership it's 5%. In NDMC areas, men pay 5.5%, women 3.5%, and for joint ownership it's 4.5%. In Maharashtra, effective April 2022, the rate is 6% for men and 5% for women (including 1% metro cess) within municipal areas, with slight variations across cities. Gift deed: Stamp duty depends on the relationship between the donor and donee. In the NCR region, the rate for a gift deed in Delhi ranges from 4% to 7%, depending on the gender. In Maharashtra, since 2017, gifts to specified relatives (spouse, parents, children, siblings) for residential or agricultural property, require a Rs 200 stamp paper, regardless of the property value. However, since April 2022, a 1% metro cess for municipal areas and a 1% local body tax (LBT) for rural areas is also charged. If the gift is to someone other than the specified relatives, the stamp duty rate in the NCR region is similar to that of a sale deed. In Maharashtra, stamp duty for gift deeds between non-family members or distant relatives is 5%. In the case of inheritance through a written will, trust deed, or under succession laws (via a court order), when the deceased has died intestate, no stamp duty is payable in any state of India. My father and his older brother owned a property with a joint khata. After my father’s death three years ago, we have repeatedly asked my uncle’s family to add my mother’s name to the records, but they have ignored our requests. How can I get my mother’s name added to the khata in place of my deceased father? What legal steps can I take? Rajat Dutta, Founder & Initiator, Inheritance Needs Services: If your father, a Hindu by birth, passed away without a will or trust deed, the Hindu Succession Act, 1956, shall apply. His property will be divided equally among his Class I heirs—his mother (if alive), spouse and children. To proceed, file a testamentary petition in the court with the relevant jurisdiction, where your father passed away or where the property is located. The petition should mention the family tree  and request that your father’s share of the property be transferred to the surviving Class I heirs. Acknowledge that 50% of the property, as per the khata, is owned by your father’s older brother, with supporting documentation. The court will verify the documents, issue a notice to your uncle and, after due diligence, decide on the matter. If there are no objections, the court is likely to grant the mutation of your father’s share to all Class I heirs. If the heirs wish for only your mother’s name on the property, they can execute a release or relinquishment deed after the court order, making her the sole owner. I am a married woman and my father died intestate. I do not want any share in his properties, which include bothhis self-acquired properties and some land as inheritance. I do not want to make a relinquishment deed in favourof my brothers as I fear it may be considered a transfer under Section 2(47) of the Income-tax Act and, hence, capitalgains tax may be levied under Section 45. I want to know if I can make a gift deed in favour of my brothers for myshare in these properties. Raj Lakhotia, Managing Partner, LABH & Associates: Yes, if you wish to give up your share in your father’s property orancestral property, you could transfer your undivided share to your brothers by executing a gift deed instead of arelinquishment deed. My father had shares in SBI Securities. He passed away recently and I need to transfer the shares to me or mymother. How can I do this? Raj Lakhotia, Managing Partner, LABH & Associates: To transfer the shares of your late father to yourself or yourmother, you need to fi rst obtain a copy of the death certifi cate and a legal heir or succession certifi cate (as asked by thecompany). Submit a Transmission Request Form (TRF) to SBI, along with the above-mentioned documents. If abenefi ciary/nominee has been named, the shares can be transferred to that person. Otherwise, the company will transferthe shares to legal heirs as per the succession certifi cate provided. It’s advisable to consult with SBI secretarial to ensurethat all procedures are correctly followed for a smooth transfer process. With due respect to Economictimes.com

Tax saving deductions and exemptions under the new tax regime Under the new tax regime, only limited tax deductions are available for taxpayers. Hence, opting for the new tax regime is a good option if you have a minimum investment. However, the tax slab rates are concessional compared to the old tax regime. Deductions that are applicable in the new tax regime are as follows: Employer contribution to NPS u/s 80CCD(2) Under section 80CCD(2), the deduction is available for the employer’s contribution to NPS. This benefit is available to individuals who receive a salary and not to self-employed individuals. An employer can contribute to the NPS contribution even if they have contributed to the PPF and EPF funds. The contribution made by the employer may be equal to or higher than the contribution made by the employee. If you are a central government employee, you can claim a deduction of up to 14% of your employer’s salary(Basic+DA). However, if you are a non-government employee, you can claim a maximum of 10% of your salary (Basic+DA). The amount that your employer contributes will be deducted from your employee payslip and deposited into your NPS account. There is an overall threshold of Rs 750,000 for employer contribution to PF, NPS, and Superannuation. Amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2) The Income Tax Act states that the total amount the applicants and the central government contribute to the Agniveer Corpus Fund will be eligible for deduction under section 80CCH(2). The act also states that an exemption will be allowed if the applicant or the nominees receive such an income under the Agnipath Scheme. Soldiers enrolled in this scheme will get all the benefits like ration, risk and hardships, travel, etc. Death and disability compensation is also available for the candidates. This deduction is now available under both regimes. Deduction under Section 57(iia) of family pension income Family pension refers to the amount the employer pays to the employee’s family in the event of the employee's death. A sum equal to ⅓ of the income received by the employee or Rs 15,000, whichever is lower among the two, will be allowed as a deduction under section 57( iia) of the family pension. Interest on Home Loan on Let-out Property under Section 24 Under the new tax regime, interest on a home loan for self-occupied property is prohibited under section 24. Whereas interest on a home loan on the let-out property is allowed as a deduction without any upper limit. Transport Allowance and Conveyance allowance Transport allowance means the allowance given to the employee by the employer to compensate for the travel expenses incurred for commuting between his place of residence and work. The exemption allowed, from FY 2018-19 onwards, will be Rs 1,600 per month and Rs. 3,200 per month for a physically challenged employee commuting from his place of residence to the place of duty. Conveyance allowance is granted to meet the expenditure incurred during the performance of office duty. However, conveyance allowance is exempt only to the extent of actual expenditure incurred. Exemptions for Voluntary Retirement Scheme u/ Section 10(10C), Gratuity Amount u/ Section 10(10) and Leave Encashment u/ Section 10(10AA). Under the new tax regime, certain exemptions under section 10 were not allowed. However, certain exemptions are now allowable. Let us discuss the exemptions allowed. A voluntary retirement scheme is offered by employers so that employees can retire voluntarily. The amount exempt under this section is Rs. 5 lakh. Individuals who receive gratuity under section 10(10), if they are government employees and then the gratuity received is fully exempt. Whereas if the employee is in private employment, then exemption on the same depends on whether they are covered under the Payment of Gratuity Act. Leave encashment is when the employee encashs all the paid leave at the time of his retirement or resignation. The maximum amount exempt has been increased to Rs. 25 lakhs as per the New Finance Bills, 2023, and the amount exceeding will be taxable. Tax saving deductions and exemptions under the old tax regime Unlike the new tax regime, deductions and exemptions are allowed under the old tax regime, which gives taxpayers the benefit of paying lower tax liability. Below are the deductions available to save tax under the old tax regime. Buy a home loan and enjoy tax benefits under Section 80C Numerous government-mandated programs, such as the PMAY (Pradhan Mantri Awas Yojana) and DDR (Delhi Development Authority) Housing Scheme, aim to make housing more accessible in India. At the same time, Sections 80C and 24(b) minimize monetary liability through lower tax burdens. Whole annual income spent on repayment of the principal borrowed amount is eligible for Section 80C deductions of up to 1.5 lakh. Section 24(b) allows for tax exemption on the interest portion of a house loan up to Rs 2 lakh per year. Furthermore, if you rent out the newly purchased home, the entire interest component is deductible from your rental income. However, to set off losses against other heads of income will be limited to Rs. 200,000. Section 80EEA allows you to claim an additional deduction in your annual tax liability if you are a first-time homeowner and satisfy the other conditions underlying the same. Buy a health insurance policy People can claim tax deductions under Section 80D for the portion of their annual taxable income spent on premium payments. Depending on the age of the covered, different sums are exempt from such income tax computations. Section 80D deduction limits are as follows: Particular Amount Medical insurance for Self and Family Rs. 25,000 (Rs. 50,000 in case of senior citizen) Medical insurance for parents Rs 25,000 (Rs. 50,000 in case of senior citizen) Preventive Health Checkup Rs 5,000 per year Medical expenditure incurred towards parents (Senior citizens) not having health insurance. Rs 50,000 Park your money in government schemes Numerous government-mandated schemes offer high returns on total investments along with tax waivers. Individuals can claim up to Rs 1.5 lakh spent on such investments as tax waivers on total annual income under Section 80C of the Income Tax Act. Tax exemptions can be availed by investing in the following tools: Senior Citizen Savings Scheme (SCSS) Sukanya Samriddhi Yojana (SSY) National Pension Scheme (NPS) Public Provident Fund (PPF) National Pension Scheme (NPS) Buy life insurance plans Section 80C of the Income Tax Act provides for premium payments, and Section 10(10D) provides for the sum promised received at maturity or early death of the insured, whichever occurs first. Yet, if the insurance is bought after 1st April 2012, tax benefits of up to Rs 1.5 lakh paid on annual premiums can be claimed under Section 80C, provided it is less than 10% of the entire sum assured. If the policy was purchased before April 1, 2012, claims under Section 80C can be filed as long as the total premium payments do not exceed 20% of the sum guaranteed. As per the Finance Act 2023, in the case of ULIP exemption, u/s 10(10D) is applicable only if the premium is less than Rs. 250,000 per year. As per the Finance Act 2023, in the case of any other insurance policy (Other than ULIP), exemption u/ 10(10D) is applicable only if the premium is less than Rs 500,000 per year. Acquisition or renewal of life insurance coverage, as well as annuity payments on such plans made through monthly salary, are also eligible for tax exemptions of up to Rs 1.5 lakh under Section 80CCC. Only certain pension funds under section 23AAB are eligible for exemptions of up to Rs 1.5 lakh under section 80CCD(1). Investment options under Section 80C The most popular tax-saving options available to individuals and HUFs in India are under Section 80C of the Income Tax Act, Section 80C includes various investments and expenses you can claim deductions on – up to the limit of Rs. 1.5 lakh in a financial year.   Investment                                        Returns                          Lock-in Period

• 5-Year Bank Fixed Deposit        6% to 7%                      5 years
• Public Provident Fund (PPF)     7% to 8%                     15 years
• National Savings Certificate

7% to 8% 5 years

• National Pension System (NPS)

12% to 14% Till Retirement

• ELSS Funds

15% to 18% 3 years

• Unit Linked Insurance Plan (ULIP)

Varies with Plan Chosen 5 years

• Sukanya Samriddhi Yojana (SSY)

8.20% N/A

• Senior Citizen Saving Scheme (SCSS)

8.20% 5 years Other Tax Saving options beyond Section 80C Apart from the 80C deductions, there are various deductions under Section 80 you can use to save on income tax. Tax benefits on health insurance premiums and home loan interest are a few- Interest paid on a home loan can be claimed as a deduction under section 24 up to Rs 2 lakh. Section 80EE also allows you to claim a deduction of up to Rs 50,000 on home loan interest, which is over and above the limit of Section 24. Any charity that is made to institutions or funds can be claimed as a deduction under section 80G. Interest paid on education loans is allowed as a deduction under section 80E Employer contribution to NPS is eligible for deduction u/s 80CCD(2) with an overall threshold of Rs 750,000 (Including Employer contribution to PF). Individual contributions to NPS are eligible for deduction u/s 80CCD(1B) with a limit of Rs 50,000 a year. Section 80GG provided a deduction for non-salaried individuals to claim a deduction of up to Rs 60,000 per annum for the rent being paid on accommodation. Section 80TTA provided a deduction of up to Rs 10,000 on Saving bank interest for ages less than 60. For senior citizens, section 80 TTB provides deductions up to Rs 50,000 on all interest incomes. How to plan your tax-saving investments for the year? The best time to start planning your tax-saving investments is at the beginning of the financial year. Most taxpayers procrastinate till the last quarter of the year, resulting in hurried decisions. Instead, if you plan at the start of the year, your investments can compound and help you achieve long-term goals. Remember, tax saving should be an additional perk and not a goal in itself. Use the following pointers to plan your tax-saving for the year: Check the tax-saving expenses you already have – insurance premiums, children’s tuition fees, EPF contribution, home loan repayment etc. Check which is the best tax regime for you, the New tax regime and the old tax regime. Use a cleartax calculator for such projection. Deduct this amount from Rs 1.5 lakh to figure out how much to invest. You needn’t invest the entire amount if expenses are covering the limit. Choose tax-saving investments based on your goals and risk profile. ELSS funds, PPF, NPS and fixed deposits are some of the popular options. Only if the old tax regime is more beneficial on the basis of current and projected deductions, then you can proceed with the future investment. This is because if you opt for the new tax regime while filling ITR, the investment that you have made will not result in any tax savings. It is best to begin investing in the first quarter of the financial year so that you can spread the investments over the year. Doing this won’t burden you at the end of the year and will also allow you to make informed investment decisions. Frequently Asked Questions How does Income Tax work in India? Given a choice, most of us wouldn’t want to pay tax on the income we earn. But we should. As citizens of India, we are also consumers of the country’s public infrastructure and facilities, and income tax is an important source of revenue for the government. So, it is our duty and responsibility to contribute towards building and maintaining the public infrastructure. Paying income tax and filing income tax returns on time ensure that. What do you mean by 80C deduction under chapter VI A? Income tax department allows reducing of the taxable income of the taxpayer in case the taxpayer makes certain investments or eligible expenditures allowed under Chapter VI A. 80C allows deduction for the investment made in PPF, EPF, LIC premium, Equity-linked saving scheme, principal amount payment towards home loan, stamp duty and registration charges for purchase of property, Sukanya smriddhi yojana (SSY), National saving certificate (NSC), Senior citizen savings scheme (SCSS), ULIP, tax saving FD for 5 years, Infrastructure bonds etc. How to save tax other than section 80C? Apart from 80C, various other provisions allow deductions to taxpayer as follows : 80D- for medical insurance premium for self, spouse & dependent parents. Section 80EE – Deduction for interest payment of home loan for first home owners Section 24- Interest deduction for housing loan upto Rs 2 lakh Section 80EEB- interest deduction for vehicle loan for purchase of electric vehicle 80G- donations to charitable institutions. 80GG-if your income does not include HRA component, you can claim rent deduction under 80GG Section 80TTA- deduction upto Rs 10,000 for interest received in saving bank account. Section 54 -54F – Capital gain exemption for capital gains. How can I save more tax on my salary? To save tax on your salary, you can utilize deductions and exemptions offered under the Income Tax Act. These include allowances like HRA and LTA, as well as the Standard Deduction. Additionally, Section 80C allows for deductions up to Rs 1.5 lakh for expenses and investments, while investing in the NPS scheme can provide an extra Rs.50,000 deduction. Other tax-saving opportunities exist under sections like 80D for health insurance premiums and 80E for education loan interest paid. What is section 80CCD? 80CCD is a subsection of 80C which allows a deduction for contributions to national pension schemes as notified by the central government. The deduction is allowed for contributions made by an employee, employer or voluntary self contribution. The overall limit of deduction allowed in section 80C is Rs 1.5 lakh plus an additional deduction of Rs 50,000 u/s 80CCD (1b) for self contribution to NPS or Atal pension yojana. What is the maximum deduction under section 80D? Maximum deduction allowed varies in different scenarios as below: Individuals can claim a maximum deduction of Rs 25000 for insurance premium for self, spouse and dependent children. Individuals can claim a maximum deduction up to Rs 50, 000 including premium for self, spouse, dependent children and dependent parents below 60 years of age. Whereas, Individuals can claim a maximum deduction of up to Rs 75, 000 including premium for self, spouse, dependent children and dependent parents above 60 years of age. Further Rs 1,00,000 can be claimed as a maximum deduction if an individual is above 60 years of age and makes the payment for premium for self, spouse, dependent children and dependent parents who are also above 60 years of age. What is section 24? Section 24 allows a deduction for home loan interest up to Rs 2 lakh if the house property is self-occupied or vacant whereas if the house is rented, the entire interest amount can be deducted from the ‘Income from house property. This deduction gets redacted to Rs 30,000 if the following conditions are not met (i) Home loan should be taken for purchase or construction of the house property (ii) The loan must be taken after 1st April 1999 (iii) In case of construction of house property, the same should be completed within 5 years. Who can claim HRA exemption? Salaried employees who receive house rent allowance as a part of salary and make a payment towards rent can claim HRA exemption to reduce their taxable salary wholly or partially. How can I save tax if I earn 15 lakh? If you earn 15 lakh, there are various ways to save tax. You can utilize exemptions such as HRA, LTA, and reimbursements to lower your net salary income. Additionally, deductions under Section 80C, 80D, and 80E for investments, expenses, health insurance premiums, and education loan interest can further decrease your taxable income and help you save on taxes. How to calculate HRA ? HRA exemption is allowed least of the below : Actual HRA received by the employee 40 % of salary for non-metro city or 50 % of salary if the rented property is in Metro city like Mumbai, Delhi, Kolkata, Chennai ) Actual rent paid less than 10% of salary. For the above calculation, the salary would include basic, dearness allowance and fixed percentage of commission. Which are the deductions applicable in the new tax regime ? In new tax regime you can following deduction Standard deduction Employer contribution to NPS u/s 80CCD(2)

As you may be aware, the government has been introducing various measures to support and strengthen the MSME sector, recognizing its significant contribution to the economy. One such measure is the inclusion of Section 43B(h) in the Income Tax Act, which pertains to the non-deductibility of certain Expenses/Purchases if the corresponding payments are not made to MSMEs within the stipulated time frame of maximum 45 days from the date of bill submission by your vendors.

Section 43B(h) states that any sum payable by the assessee to an MSME, as defined under the Micro, Small and Medium Enterprises Development Act, 2006, shall be allowed as a deduction only if it is actually paid on or before the due date of 45 days from the date of bill submission by your vendors.

In simpler terms, if your business owes payments to MSMEs for goods or services rendered, it is crucial to ensure that these payments are made within the timelines prescribed by the MSME Development Act to avail of tax deductions.

 

Failure to comply with the timelines specified may result in the disallowance of deductions for such expenses, thereby potentially increasing your tax liability. Therefore, it is imperative to stay informed about your obligations regarding MSME payments and ensure timely settlement to avoid any adverse consequences.

We are committed to assisting you in navigating through regulatory changes and ensuring compliance with relevant laws and regulations. Should you have any questions or require further clarification regarding Section 43B(h) or any other matter related to MSME payments, please do not hesitate to reach out to us.

We invite you to go through the detailed information here along with important FAQs for your understanding of the section.

  1. Section 43B (h) Applicability

This clause is applicable when an enterprise is buying goods or taking services from an enterprise registered under the MSMED Act, 2006. Notably, the registration of the buyer under the MSMED Act, 2006, is not mandatory. Clause (h) of Section 43B comes into effect from April 1, 2023. The payments that go beyond the specified time limit under Section 15 of the MSMED Act are covered under this clause and are allowed as deductions only upon actual payment.

The newly added clause (h) in Section 43B specifically covers any sum payable by the assessee to a micro or small enterprise.

   

2. Section 43B (h) Applicability on Traders

As per Office Memorandum No. 5/2(2)/2021-E/P and G/Policy dated July 2, 2021, wholesale and retail traders are entitled to Udyam registration only for the benefit of Priority Sector Lending. So, Section 43B(h) is not applicable for dues outstanding to traders as per the MSMED Act’s definition of enterprise.

3. Section 43B (h) Time Limit

Business enterprises are required to pay MSMEs within 45 days, as per section 15 of the MSMED Act, 2006, depending on the presence of a written agreement. In the absence of a written agreement, payment should be made within 15 days. In case there is a written agreement, payment shall be made as per the agreed-upon timeline, not exceeding 45 days.

 

4. Example of Section 43B (h)

     

Sr. No.	Day of acceptance of any goods or services by a buyer from a supplier		Credit period (Days)	Actual date of payment	Deduction allowed in which FY
1	29/03/2024		60	25/05/2024	FY 2024-25
2	01/04/2024		45	21/05/2024	FY 2024-25
3	31/01/2024		15	20/02/2024	FY 2023-24
4	11/09/2023		20	03/10/2023	FY 2023-24
5	30/11/2023		30	20/12/2023	FY 2023-24
6	21/04/2024		40	20/06/2024	FY 2024-25
7	15/12/2023		–	05/04/2024	FY 2024-25
8	10/11/2023		–	30/11/2023	FY 2023-24

                      5. What is the Ultimate effect of Non payment within 45 days or agreement date whichever is earlier?

The tax auditor shall be required to report unpaid dues to micro and small enterprises in Form 3CD of the Tax Audit Report. The assessee shall be required to add back to its total income the disallowance reported in Form 3CD of its Tax Audit Report.

In case the business enterprise does not make payments to Micro, Small and Medium Enterprises (MSME) in the above prescribed period, then it has to make payment of compound interest at monthly interests to the supplier at three times bank interest as same is notified by the Reserve Bank of India (RBI).

 

6. Can payments made after the due date be carried forward for deduction?

Payments that go beyond the specified time limit under Section 15 of the Micro, Small and Medium Enterprise Development (MSMED) Act. 2006, are covered under clause (h) of Section 43B and are allowed as deductions only upon ‘actual payment’.

 

7. How is SMALL or MICRO category of the vendor decided

 

Category of Enterprise	Criteria for classification
Micro Enterprise	·         Net investment in plant and machinery or equipment does not exceed Rs 1 crore; and ·         Net turnover does not exceed Rs 5 crores.
Small Enterprise	·         Net investment in plant and machinery or equipment does not exceed Rs 10 crore; and ·         Net turnover does not exceed Rs 50 crores.

                    8. What is the time limit prescribed under Section 15 of the MSMED Act for making payment?

Section 43B(h) refers to the limitation period specified under Section 15 of the MSMED Act, which provides that where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing. However, this agreed date cannot exceed 45 days.

If there is no agreement on this behalf, the buyer shall make the payment before the appointed day.

As per Section 2(b) of the MSMED Act, “appointed day” means the day immediately after the expiry of the period of 15 days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier.

For example, where goods are supplied and accepted on 30-03-2024, the due date for payment under Section 15 of the MSMED Act shall be computed as follows:

Date of acceptance of supply	Credit period	Due date for payment	Remarks
30-03-2024	30 days	28-04-2024	Due date as per terms of the agreement
30-03-2024	60 days	13-05-2024	Due date cannot exceed 45 days from the date of acceptance
30-03-2024	No agreement	13-04-2023	In the absence of an agreement, the due date cannot exceed 15 days from the date of acceptance

                      9. Should terms mentioned on the invoice or purchase order be treated as an agreement?

The MSMED Act does not define the term ‘agreement’. Thus, it can be said that agreement can be written as well oral. In common parlance, an agreement means when one person makes an offer and another person agrees to it. It includes terms like due dates, acceptance of goods/services, consequences for late payment, and dispute resolution. So, if an invoice or purchase order has these details, it can be seen as an agreement.

 

10. What is meant by the terms “the Appointed Day”, “the day of acceptance”, and “the day of deemed acceptance”?

The “appointed day” is relevant only if the buyer and the seller have not agreed to any due date for payment in writing. As per Section 2(b) of the MSMED Act, “appointed day” means the day immediately after the expiry of the period of fifteen days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier.

The following points are noteworthy:

1. “The day of acceptance” means the day of the actual delivery of goods or the rendering of services;
2. Where any objection is made in writing by the buyer regarding the acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, “the day of acceptance” means the day on which the supplier removes such objection;
3. “The day of deemed acceptance” means where no objection is made in writing by the buyer regarding the acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of services.

11. What does the term “Supplier” mean in Section 15 of the MSMED Act

 Section 2(n) defines “supplier” to mean a micro or small enterprise that has filed a memorandum with authority referred to in Section 8(1) (i.e., Udyam Registration).

It must be noted that only micro and small enterprises that are Udyam-registered are considered suppliers for the purpose of Section 15 of the MSMED Act. Further, they shall be regarded as suppliers, in respect of goods supplied by them or services rendered by them on or after the date of Udyam Registration. Udyam Registration is not retrospective.

 

12. Is the disallowance under Section 43B applicable if supplies are made before obtaining Udyam registration?

Section 43B(h) will not apply with respect to payments for supplies made before the date of Udyam Registration. He would be regarded as a micro-enterprise only from the date of obtaining such registration as Udyam Registration does not operate retrospectively.

 

13. Will the disallowance apply to the sum payable to retail traders or wholesalers?

Para 2 of Office Memorandum: No. 5/2(2)/2020/E/P&G/POLICY dated 2-7-2021 issued by Central Government has clarified that “The Government has received various representations and it has been decided to include Retail and wholesale trades as MSMEs and they are allowed to be registered on Udyam Registration Portal. However, benefits to Retail and Wholesale trade MSMEs are to be restricted to Priority Sector Lending only.” Central Government’s office memorandum 1/4(1)/2021- P&G Policy, dated 01.09.2021, further clarifies that “the benefit to Retail and wholesale trade MSMEs are restricted up to priority sector landing only and other benefit, including provisions of delayed payment as per MSMED Act, 2006, ARE EXCLUDED.

 

In view of the above Office Memorandum, dated 01.09.2021, a Supplier who is a micro or small enterprise cannot be treated as “Supplier” for section 15 and section 43B(h) purposes if his Udyam Certificate shows his activity as only a trader.

Although there does not appear to be any legal basis in MSMED Act for the Office Memorandum and Wholesale & Retail Trade are treated as distribution services under GATT/WTO, the above position will prevail till any Trader/Traders body challenges the OM in Court and gets it quashed.

 

  

 

14. Will the GST component be disallowed if the sum payable to MSE attracts Section 43B(h) disallowance?

If the sum payable to the Micro or Small Enterprise includes GST, the disallowance is restricted to the amount excluding GST if the GST is claimed as Input Tax Credit (ITC) in the books of accounts. However, if the buyer opts not to claim the input tax credit under GST and treats it as an expense in its Profit and Loss account, deduction against GST will only be allowed based on actual payment.

 

15. Will Micro or Small Enterprises having Udyog Aadhaar Memorandum or EM-II be regarded as micro or small enterprises for Section 43B(h) purposes?

UAM or EM-II Registration was valid only up to 30-06-2022. These registrations are not valid with effect from 01-07-2022. There is no process of automatically migrating the enterprises from UAM/EM-II to Udyam Registration unless the enterprise files Udyam. Therefore, enterprises with UAM/EM will not be regarded as micro or small enterprises for Section 43B(h) purposes.

 

16. Does Section 43B(h) apply with respect to the amounts due towards the purchase of Capital Goods?

Unlike Section 37(1), the deductibility under Section 43B is not linked to the distinction between capital expenditure and revenue expenditure. Section 43B applies to sums payable in respect of which a deduction is otherwise allowable under this Act.

 

17. Whether disallowance attracts if the assessee opts for a presumptive taxation scheme under Section 44AD, Section 44ADA, Section 44AE, etc.?

Section 43B(h) begins with a non-obstante clause “notwithstanding anything contained in any other provision of this Act”. Therefore, apparently, Section 43B overrides all provisions of the Act including provisions of presumptive taxation under Section 44AD, Section 44ADA, Section 44AE, Section 44BBB and Section 115VA (Tonnage Tax)

However, Sections 44AD, 44ADA, 44AE, 44BBB and 115VA also begin with non-obstante clauses as ‘Notwithstanding anything to the contrary contained in Sections 28 to 43C,…….’

Therefore, Section 43B(h) overrides all other provisions of the Act except Sections 44AD, 44AE, 44ADA, 44BBB and 115VA. Therefore, Section 43B(h) will not apply to eligible assessee-buyers who opt for presumptive taxation under Sections 44AD, 44AE, 44ADA, 44BBB or 115VA.

 

18. What if a 50% advance is given in the current year, and the balance of 50% is paid to the MSE supplier at a later date?

If the taxpayer settles 50% of the remaining balance during the fiscal year, even after the due date under Section 15 of the MSMED Act has passed, no disallowance will occur. However, if this 50% remains outstanding at year-end and is paid after the due date, disallowance would apply to this portion payable to MSEs.

 

19. What if the cheque is handed over to the MSEs on or before the due date, but it is encashed by them after the due date?

As per accepted commercial usages, payment is regarded as made on the date the cheque is handed over to the payee, provided the cheque does not bounce subsequently. Therefore, in such cases, payment will have to be treated as made within the due date.

 

20. Will Section 43B(h) apply to an assessee who is also a Udyam-Registered Micro or Small Enterprise?

Yes. There is no exemption for buyers who are Micro or Small enterprises. It cannot be said that Section 43B(h) applies only to medium or large enterprise buyers.

       

                      ALL THIS IS FINE BUT WHAT TO DO?    

1. IF YOU ARE PURCHASER FROM MANUFACTURER OR SERVICE PROVIDER

 

1. Ask whether the vendor has Udyam Aadhar
2. Check if he is "Micro" or "Small" as defined above
3. If point 2 above is applicable, make payment before expiry of 45 days from the date of bill received or date of acceptance or deemed acceptance by you from the Seller.

      2. IF YOU ARE SELLER AND REGISTERED UNDER UDYAM AADHAR         Simply send your Udyam Aadhar Certificate to the Purchaser along with link to this article (for them to understand)     Please note, the information on this website is only for knowledge purpose and should not be relied upon as legal advice or opinion.  

Preconditions for Striking Off of LLP

1. Not carrying on any business or operation since incorporation or for a period of one year or more (Hence, if the LLP is operational and the partners wish to close the LLP, the LLP must first cease all commercial activity) and
2. Consent of all partners of the limited liability partnership for striking off its name from the register.
3. File overdue returns in Form 8 and Form 11 up to the end of the financial year in which the limited liability partnership ceased to carry on its business or commercial operations before filing Form 24;

FEATURES	Private Limited Company	One Person Company (OPC)	LLP	Partnership	Proprietorship
Separate legal entity	✓	✓	✓	✕	✕
Limited Liability	✓	✓	✓	✕	✕
Number of members	2-15	1	2-99	2-20	1
Number of Directors /DP	2-15	1-15	2-99	NA	NA
Investor Preference	✓	✕	✓	✕	✕
Foreign Investment (FDI)	✓	✕	✓	✕	✕
Ownership Transfer-ability	✓	✓	✓	✕	✕
Perpetual Existence	✓	✓	✓	✕	✕
Tax Benefits	High	High	Low	Low	High
Statutory Compliance	High	Low	Low	Low	Low
Market Credibility	High	Moderate	High	Low	Low
Managerial Remuneration	No Limits	No Limits	Upto Limits	Upto Limits	Not Allowed

• Open a Bank Account - Immediately post Incorporation (CapitalCA already covers this)
• Deposit Full Share Capital to the Bank Account - Only from savings account of Shareholder through cheque, NEFT/RTGS
• Issue of Share Certificate to Shareholders
• GST Registration and providing Bank Account details for GST Registration (CapitalCA already covers this)
• Appointment of Auditor (Chartered Accountant) - Within 30 days from the Incorporation date (Team CapitalCA is at your service)
• Disclosure of Interest (details of ownership or shareholding or Directorship) in any other Company/LLP/Firm in the Form MBP 1
• MSME / SSI / Udyog Aadhar / Udyam Registration (CapitalCA already covers this)
• Trademark Registration (Team CapitalCA at your service)
• Startup India Registration and Recognition (Team CapitalCA is at your service)
• Finalising Accounting, Invoice Formats and System setup for smooth operations (Team CapitalCA is at your service)
• Filing GST Returns, Income Tax Returns and ROC Filings at respective due dates (Team CapitalCA is at your service)