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Tata Capital > Blog > Impact of Budget 2017 on Business Finance Sector

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Impact of Budget 2017 on Business Finance Sector

Impact of Budget 2017 on Business Finance Sector

The Union Budget 2017-18 was presented by the Government of India on 1st February 2017 for the financial year starting 1st April 2017. The Budget will indeed create a huge impact on numerous sectors in India, the business finance sector being one of them.

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Impact on small businesses

Micro, Small and Medium Enterprises (MSMEs) contribute to the economic growth of India to a large extent. This sector offers employment opportunities and also contributes to the exports of the country. Being the backbone of the economy, MSMEs received a great impetus in the Budget 2017-18. Earlier, MSMEs had to pay higher taxes. However, the Budget proposed to reduce income tax of small companies with an annual turnover of up to INR 50 crore by 5%. This indicates that the existing income tax rate of 30% will be reduced to 25%. It is estimated that around 6.67 lakh companies in India will benefit from this move.

The Government of India has also decided to double the lending target of banks under the Pradhan Mantri MUDRA Yojana scheme to INR 2.44 lakh crore. This will result in enhanced accessibility of loans to the MSME sector.

Tax breaks for startup companies

The Budget 2016-17 introduced income tax exemptions for startups. The current Budget further increased the period of profit-linked deductions available to the startups from the existing five years to a period of seven years. It is, however, important to note that tax breaks are applicable on the profits made by startups for three years. Such a benefit may be availed of only by startups recognized by the DIPP (Department of Industrial Policy & Promotion). Due to such an advantage, entrepreneurs will be encouraged to set up their ventures. Entrepreneurs may avail of finance from banks or Non-Banking Financial Companies (NBFCs) and establish their business without any financial constraints.

Digitalization

The Budget also proposed numerous changes in order to transform India into a digital economy. After the demonetization move, the Budget further aims at converting India to a cashless economy. Those merchants using the government-aided BHIM Aadhar-based mobile wallet are eligible for cashback schemes. Further, all government receipts will be made available through the Internet. To further boost cashless transactions, Small Industries Development Bank of India (SIDBI) is set to refinance businesses based on their transaction history. This will benefit the business finance sector largely, especially in the rural and semi-urban parts of India.

The Budget will indeed strengthen the economy of India even further. Moreover, through business loans, firms may benefit from competitive rates of interest, lower fees and charges, minimal documentation requirement, flexible eligibility criteria, quick loan disbursal, flexible repayment plans, besides many others. Enterprises may, therefore, apply for business loans and deploy the disbursed amount to fund their business activities, thereby bringing about entrepreneurial growth and development.

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