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News INCOME TAX

  • May 30, 2024
  • FM Sitharaman: Will go back to original rule if MSMEs okay with delay in payments beyond 45 days

    Finance Minister Nirmala Sitharaman said on Tuesday that the government will repeal the changes made to Section 43B of the Income Tax Act if MSMEs want to continue operating with uncertainty on payment timelines from their buyers.

    Interacting with MSMEs and local industries in Ludhiana, Sitharaman said the government added the 45-day payment rule effective since 2008 to the Income Tax Act on the request of MSMEs facing delays in payment from their buyers beyond 45 days.

    “If MSMEs want relaxation in payment made by their buyers without the 45-day limit, whether over 45 days, 150 days or a year and further, then it is easy to make the changes. We will change it and go back to the original rule,” Sitharaman said.

    The government in last year’s budget had proposed to add a new clause h under Section 43B of the Income Tax Act to address the challenge of delayed payments faced by MSMEs in the country, hindering the flow of working capital and overall business growth.

    The clause (h), which came into effect on April 1, 2024, with 2024-25 as the assessment year (that is financial year 2023-24), allows expenses to buyers on invoices from micro and small enterprises only if paid within 45 days (where agreement exists) and within 15 days if there is no agreement in the year of actual payment instead of the year when it was incurred as an expense.