Small cos get big tax break

  MORE THAN 10 MILLION MICRO AND small enterprises around the country are likely to welcome the Budget announcement that has given businesses with annual turnover of less than Rs 40 lakh the option of not maintaining their books of accounts and pay income tax on a fixed 8% of their revenues.

    Finance minister Pranab Mukherjee said that such businesses would have the option of not paying advance taxes. The new scheme, which will come into effect from the financial year 2010-11, is also expected to provide a thrust to new entrepreneurship in the country as it will reduce entry barriers for budding entrepreneurs.
    "The proposal will rid a very large number of businesses from harassment by Income Tax authorities and reduce paperwork," Federation of Indian Micro and Small & Medium Enterprises (FISME) secretary general Anil Bhardwaj told ET. Ashoka Novelty Centre, a Rs 20-lakh gift shop in Delhi's Sadar Baazar, for instance, currently hires a chartered accountant to help maintain its books and pays taxes at the rate of 20%. Partner Tara Chand Gupta said that the new rules will help him reduce the cost of hiring a CA and also avoid bureaucratic hassles and harassment by tax authorities. "We can now concentrate on our business," Mr Gupta added.
    It will also diminish the burden of tax authorities as they will now have to deal with lesser number of cases, files and returns from assesses since the number of entities up to a turnover of Rs 40 lakh is huge, law firm Kochhar & Co managing partner Rohit Kochhar added.
    In fact, the Budget brought a lot of good news for the MSME sector. Irritants such as fringe benefit tax (FBT) and commodity transaction tax (CTT) have been done away with. Abolition of CTT will, in the long run, reduce raw material costs for SMEs.