Subrata Saha
Bank of Baroda; Baroda Academy, North Eastern States, Guwahati
India’s Micro, Small and Medium Enterprises (MSME) contribute approximately 30%- 31% to nation’s GDP employing over 32.82 crore persons across urban, semi urban and rural areas. Credit support from Banks and NBFCs has always been a factor of GDP. MSME not only contributes in enhancement of production of goods and services but also develops overall economic development. Over the past few years, the sector has witnessed significant policy changes such as extension of CGTMSE Loan coverage from Rs 5 crore to Rs 10 crore, enhancement of PMMY maximum Limit from Rs 10 lakh to Rs 20 lakh, reduction in CGMSE Annual Guarantee Fee, introduction of many subsidy schemes and funds by state and central government both etc. Despite of this, MSME in many states, regions, places still below the mark in contribution towards Nation’s GDP. The National Bank for Agriculture and Rural Development (NABARD) estimated a credit potential of Rs 1136.22 crore specifically for the MSME sector to boost ground level credit flow. There are many reasons hindering the growth of MSME units such as geographical disparity, demand gaps, lack of awareness etc.
Government of India has brought new tax regime in Union Budget 2020-21 and which was further modified in Union Budget in 2023-24. Under new tax regime, an individual taxpayer can avail tax exemption on business income up to Rs 4 lakh annually without the need to invest in instruments such as LIC or PPF. On the other hand, old tax regime also provides basic exemption for taxable income upto Rs 2.50 lakh along with additional deduction of Rs 1.50 lakh for investment in Small Saving Schemes, LIC, other eligible instruments etc. Section 10 (26) of Income Tax Act, 1961 provides full tax exemption members residing in specified North-Eastern states (Arunachal Pradesh, Manipur, Mizoram, Nagaland, Tripura), Ladakh and notified tribal areas provided their income arises from these areas. However neither filing Income Tax Return obligates a person to pay income tax nor the people of zero income tax slab gets relaxation from filing the same return. Many a times, we misunderstand the concept of getting exempted from income tax with filing of the income tax return for a particular year. Non filing of Income Tax Return is one of the reason for rejection of the application for loan for a MSME unit.
During processing a loan, Banks/NBFCs get data from application and verify through various tools like online channels, pre-sanction visits, credit information reports etc. Very importantly, they check the past experience of a prospect and match with his or her history of financial dealings. For which Income Tax Returns (ITR) play a vital role in the appraisal part. An ITR of a business person binds the financials like Balance Sheet, Profit & Loss Account etc. which is also a source of various Business Data like Sales, Capital, value of Stock etc. Thus ITR not only provides the credit worthiness but also envisages the justified loan limit. Filing ITR year after year has become a crucial element in getting credit support from a Bank or NBFC.
