What are the new credit guarantee schemes for MSMEs under Budget 2023

The MSME budget 2023 has introduced The revamped credit guarantee scheme which will bring in ₹9000 crores in the corpus, which will allow business owners to take collateral-free guaranteed credit of ₹2 Lakh crore.  The MSME union budget 2023 has also reduced the cost of credit for MSMEs by 1%.

Change in Tax Deduction Calculations

Micro, small and medium enterprises will be finding the 2023 union budget very helpful in their business as the budget also proposed to allow a deduction to clients for expenditure incurred on payments only on an actual and not accrual basis. Meaning to reap tax deduction benefits, clients of MSMEs will have to pay out the complete sum of products and services. Due to this many small and medium businesses will see an inflow of money from their outstanding receipts of payments, improving the MSME sector’s liquidity.

The new budget allocation for 2023-24

The union budget for 2022-23 had announced ₹15,629 crores for the MSME sector, however, come this 2023-24 sector, the budget allocation for MSME ministry has seen an upward movement of 42% with ₹22,138 crores to be made available this financial year. Businesses registered under MSME are also noted to receive up to 95% of performance security from the government in case of failure to execute contracts.

There are also higher budget allocations given to schemes such as Raising and Accelerating MSME Performance (RAMP) and Scheme for Fund for Regeneration of Traditional Industries (SFURTI) for the betterment of the MSME sector of India. These schemes and budget allocations will come into effect from 1st April 2023.

MSME is a growing sector of India which has the potential to generate very high returns in the future and these reforms will make that happen sooner rather than later.

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