Budget 2023: MSMEs set to get money on time as deductions go to actual payments

Micro, small and medium enterprises (MSMEs) are expected to see expedited receipts of payments and improvement in liquidity as the budget proposed to allow deduction to clients for expenditure incurred on payments only on actual and not accrual basis. Finance minister announced that such payments will be covered within the ambit of the Income Tax Act, 1961 and hence will be allowed as deduction on an actual payment basis only, disregarding the accrual concept. “The government intends to cover that under Section 43B of the I-T Act, 1961, and it is part of the socioeconomic welfare measure.

MSMEs are supposed to receive payments within 45 days if there is an agreement and/or within 15 days, if there is no agreement,” said Sanjay Kumar, partner, Deloitte India.

Micro enterprises with sales of up to Rs 2 crore and certain professionals with turnover of up to Rs 50 lakh can avail benefit of presumptive taxation.


“I propose to provide enhanced limits of Rs 3 crore and Rs 75 lakh, respectively, to taxpayers whose cash receipts are no more than 5%,” she added.