New Income tax law for purchases from MSME (Only Micro and Small MSME)

 

Any sum owed by an assessee to a micro or small enterprise that is outstanding beyond the time limit specified in section 15 of the MSMED Act, 2006, shall be allowed as expense in the income tax return only in the financial year in which such sum is paid.

 

However interest payable under the MSME Act for late payment is disallowed forever. It is compound interest at three times the bank rate.

 

Definition of Micro, Small and Medium:  

 

(i) a micro enterprise, where BOTH the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees; COVERED

(ii) a small enterprise, where BOTH the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees; COVERED

and

(iii) a medium enterprise, where BOTH the investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees. NOT COVERED