Tag: income tax

              📢 𝗔𝘁𝘁𝗲𝗻𝘁𝗶𝗼𝗻 𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗢𝘄𝗻𝗲𝗿𝘀!  📢 Introduction Not being a matter of compliance, staying ahead in the business finance’s dynamic world means strategic necessity. With respect to MSME (Micro, Small and Medium Enterprises) vendors’ payments, the Finance Act of 2023 introduces an amendment to Section 43B of the Income Tax Act, which would ensure payment towards the goods supplied by MSMEs within 45 days. This is as per provisions provided under Section 15 of the MSMED Act, 2006, to ensure prompt payments so that MSMEs will not be affected by delays in any fund flow issues. This amendment will be effective from FY 2023-24 onwards and it is expected to revolutionize financial planning for businesses at large. This legislative revision demands attention and adaptation among business owners. It revamps the framework under which payments to MSMEs must be processed while setting out specific timelines that if not followed could affect deductibility of these expenses in your tax returns. Understanding every part of this change is necessary towards maximizing your tax efficiency, meeting deadlines, and keeping adequate cash flow. In addition to the introduction that serves as a backdrop for comprehending the importance of the amendment of section 43B and its aspects relating to businesses particularly when dealing with MSME vendors. This blog aims at providing a breakdown for Section 43B amendment in terms that are easy to understand and implement. Our focus shall be on how this will affect your organization, taking illustrative examples into consideration as well as giving practical steps that can allow for seamless transition. Moreover, we shall also look at how technologies like Marg ERP’s Auto WhatsApp Payment Reminders can play an important role in enhancing efficiency, and streamlining your payment processes. Free Download Inventory & Accounting Software Send Your Queries Understanding Section 43B Amendment The recent amendment to Section 43B of the Income Tax Act under the Finance Act 2023 has ordered for a more structured payment approach for MSMEs. This legislative change looks forward to ensuring that MSMEs get paid on time so that they can have an improved cash flow hence their financial stability.  Any purchases made from MSMEs now must be paid within 15 days from date of purchase except if it is agreed upon that there will be a credit period whereby such payment should not exceed 45 days.  In order to claim deduction in FY 2023-24, payments must be made within the specified period. Should this not be done, then during this financial year, the said deduction will fail to be allowed and will be pushed forward to whenever such payment is eventually done.  SCENARIO-BASED UNDERSTANDING To better understand what the amendment means, consider the following scenarios. Scenario 1: On January 15, 2024, a business buys goods worth Rs. 1 lakh from an MSME without specifying any credit terms. The amendment requires that this amount be paid by January 30, 2024 for tax deduction to be claimed in the financial year 2023-24. Scenario 2: In case there is an agreement between the business and an MSME on a credit period of forty-five days, March 1, 2024 becomes the payment due date. This flexibility allows better cash flow management whilst ensuring adherence to tax deduction norms. Scenario 3: For instance, if payment is made by March 31st, it will fall within the fiscal year and therefore the expenditure will be deductible during FY2023-24. However, failure to affect such payments past this time frame transfers such deductions over to next financial periods. Actionable Steps for Compliance In reaction to the change to Section 43B, groups are recommended to take proactive measures to make certain seamless compliance and preserve economic fitness. Here's how: Stay Informed: Keeping abreast of legislative adjustments is crucial. Understand the specifics of the Section 43B modification to make knowledgeable choices approximately your financial planning and operations. Strategic Payment Planning: Adjust your price schedules to align with the state-of-the-art price timelines. Planning your payments within the stipulated length no longer best optimizes tax benefits however additionally helps the economic balance of your MSME organizations. Record Keeping: Accurate and precise document-preserving is greater important than ever. Ensure which you have comprehensive information of all transactions, along with buy dates, fee amounts, and charge dates. This will not most effectively help in proving compliance however also in handling cash flows more effectively. The Power of Auto-WhatsApp Payment Reminders in Streamlining Collections With the modification to Section 43B of the Income Tax Act growing a new paradigm for business transactions with MSME vendors, there's a heightened attention on optimizing financial operations to make sure efficiency and performance. An essential factor of this optimization is streamlining the gathering manner, a challenge that has traditionally consumed significant assets and time for groups. In this context, the introduction of technology driven solutions like Auto WhatsApp Payment Reminders has emerged as a game-changer, offering a plenty of benefits with an aim at...