MSME Relaxation & Benefits in Budget 2023

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MSMEs not only generate employment, but they also support big industrial houses and other entities.

Thus, it’s rightly said that the MSMEs are the backbone of industrial development in the country.

In emerging economies like India, the MSME sector can account for up to 40% of the GDP.

So, the importance of MSMEs in economic growth cannot be overstated.

The Govt. has introduced several schemes in the Union Budget 2023.

These are offered to MSMEs to encourage the growth and ease of doing business.

Let’s understand them through this article.

Tax Benefits and Regulatory Ease for MSMEs and Startups in Budget 2023

Increase in Threshold Limits and Promotion of Non-Cash Transactions for MSMEs and Startups

  • The threshold limits for the presumptive taxation scheme have been increased from Rs.2 crores to Rs.3 crores for eligible businesses to promote non-cash transactions and ease compliance.
  • This increased limit will only apply if the aggregate of the amounts received in cash during the year does not exceed 5% of the total gross turnover/receipts.

Concessional Tax for New Manufacturing Co-operative Societies

  • A concessional tax rate of 15% is provided for new manufacturing co-operative societies established on or after 01/04/2023, commencing production or manufacture by 31/03/2024, and not availing of any specified deduction or incentive subject to compliance of terms and conditions given in the Rules.

Relief in Carry Forward and Set Off of Losses for Startups

  • Startups can carry forward their losses on a change of shareholding for ten years, up from seven years.
  • The condition of continuity of a minimum of 51% shareholding to set off carried-forward losses is relaxed for eligible startups if all company shareholders continue to hold those shares.

Extension of Incorporation Period for Tax Exemption for Startups

  • The period of incorporation of certain eligible startups for receiving tax benefits is extended by one more year, i.e. 01/04/2024.

Simplification of Claiming Amortisation Deduction for Preliminary Expenses

  • The condition of a concern approved by the Board to carry out the activity in connection with certain preliminary expenses for claiming amortisation deduction is proposed to be removed.
  • The government will prescribe the format for reporting such expenses by the assessee.

Promotion of Timely Payments to MSMEs through Income Tax Act Amendment

  • Payments made to MSMEs are included within the ambit of Section 43B of the Income Tax Act, 1961, to promote timely payments to MSMEs.
  • A deduction for such payments will only be allowed when it is actually paid. It will be allowed on an accrual basis only when the payment is made within the time prescribed under the Micro, Small and Medium Enterprises Development Act.

Initiatives to promote MSMEs and Agri-Startups in Budget 2023

Credit Guarantee Scheme for MSMEs extended,

  • The Credit Guarantee Scheme for MSMEs will be revamped with an infusion of Rs. 9,000 crore in the corpus, effective from 01/04/2023. This will enable collateral-free guaranteed credit of up to Rs. 2 lakh crore and reduce the cost of credit by about 1%.

MSMEs can benefit from relief under Vivad Se Vishwas 1

  • If MSMEs fail to execute their contracts within the COVID term, the government and its undertakings would reimburse 95% of the forfeited sum due to bid or performance security.

Agriculture Accelerator Fund established to support agri-startups

  • An Agriculture Accelerator Fund will be established to promote and encourage Agri-startups by young entrepreneurs in rural areas.
  • The fund aims to provide affordable and innovative solutions for challenges faced by farmers, bringing modern technologies to transform agricultural practices, and increasing profitability and productivity.

Businesses can now use a Common Business Identifier

  • A PAN will be the common identifier in all digital systems of specified government agencies for business establishments required to have one.
  • This will be facilitated through a legal mandate and bring ease of doing business.

MSMEs can access Entity DigiLocker, a digital storage solution

  • An Entity DigiLocker will be set up for MSMEs and large businesses to securely share and store documents online with various regulators, banks, authorities, and other business entities.


In India, MSMEs are considered the backbone of industrial development, contributing significant percent of the country’s GDP. With the introduction of new schemes in the Union Budget 2023, the government aims to encourage the growth and ease of doing business for MSMEs and startups.

These schemes include tax benefits, relief in carry forward and set off of losses, and credit guarantee schemes. Additionally, the establishment of an Agriculture Accelerator Fund and the provision of a Common Business Identifier and Entity DigiLocker aim to promote innovation and ease of doing business for MSMEs.

Overall, these initiatives are expected to provide a significant boost to the MSME sector and contribute to the growth of the Indian economy.

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Moreover, you require any kind of guidance related to MSME Registration, please feel free to contact our business advisors at 8881-069-069.

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