No Alterations to Section 43B(h): Finance Secretary

New Delhi, Jul 27 (KNN) In a recent interview on Thursday, Finance Secretary TV Somanathan addressed concerns regarding Section 43B(h) of the Income Tax Act, which pertains to payments to micro and small enterprises. 

Somanathan affirmed that the government has no plans to alter the provision that allows tax deductions for payments made to MSMEs only upon actual payment, especially if they exceed the 45-day limit specified in the MSME Development Act 2006.

The Finance Secretary emphasised the government's commitment to supporting labour-intensive sectors through targeted schemes. "Our three new schemes are entirely focused on the amount of labour employed," Somanathan stated, highlighting that this approach inherently benefits sectors with higher labour intensity.

He elaborated on the design of these schemes, noting that they are not based on investment or production subsidies. Instead, they are structured to provide greater advantages to businesses that employ more workers. "If you are an MSME in footwear or textiles, you will automatically benefit more from this scheme due to its design," Somanathan explained.

The Finance Secretary's comments come in the wake of the Finance Act 2023, which introduced Section 43B(h) in the Income Tax Act. This provision mandates that larger companies cannot deduct expenses from their taxable income if they fail to pay MSMEs within 45 days of a written agreement.

Somanathan's statements reaffirm the government's strategy to support and encourage labour-intensive sectors, particularly within the MSME segment. 

By maintaining the current tax deduction rules and implementing labour-focused schemes, the government aims to create a more favourable environment for businesses that contribute significantly to employment generation.

(KNN Bureau)