After a fairly volatile past few months following demonetisation, the Indian Union announced its budget for the financial year 2017-18.
While tax rates remain broadly stable, the thrust of the Finance Minister in this year’s budget was to reduce corporate taxes for small and medium companies with a turnover of less than Rs. 500 million (about USD 7.4 million). For these companies, the tax rate went down to 25%.
What does this mean for small and medium size businesses? For SMBs, provisions relating to improving the process of carry-forward losses allow for comfortable conditions concerning ownership changes.
Eligible start-ups can now avail their three-year tax holiday in a block of seven years instead of five years giving them more time to take advantage of the benefit. The proposal to carry forward losses in spite of a change in 51% of shareholding, provided original promoter shareholding continues represents a relief for small business owners.
The big digital push will take place this year, a move that we consider will guarantee continuous growth of the economy and make all the difference for small business finances. This year’s budget invests heavily in technology and digitization. The focus on digital payments will lead to a revolutionary transformation in Indians’ payment habits. Digital payments will become the new normal in 2017. We are very excited about this! Going digital, not only speeds up and eases transactions but also increases the nation’s taxpayer base and results in bigger revenue transparency.
Upgrading the existing digital infrastructure to support cashless transactions in rural and semi-urban areas will encourage merchants and consumers to reduce their use of cash and increase the usage of online platforms. The government still has to improve digital security, however. Secure digital transactions are the only way to sustain India’s habit of cashless payments.
This year’s budget also provides tax benefits to the small business ecosystem. Reducing the corporate tax for Medium and Small Scale Enterprises (MSMEs) to 25% will increase investment in India. It will surely give the domestic sector a massive push and help the country restore its strong GDP growth forecast.