HOW UDYAM REGISTRATION PROVIDES TAX BENEFITS

How Udyam Registration Provides Tax Benefits

How Udyam Registration Provides Tax Benefits

Blog Article


Udyam Registration is an initiative by the Government of India to support Micro, Small, and Medium Enterprises (MSMEs). It provides legal recognition and helps businesses access various financial and tax benefits.

For any MSME, reducing tax liability and gaining government support can significantly impact growth. Udyam Registration offers multiple tax exemptions, subsidies, and deductions, which help businesses save money and improve profitability.

This article explains how Udyam Registration provides tax benefits and why every small business should register.

What is Udyam Registration?


Udyam Registration is an online certification process for MSMEs under the Ministry of Micro, Small, and Medium Enterprises (MSME), Government of India. It replaces the Udyog Aadhaar and simplifies the process of registering a business as an MSME.

After registration, businesses receive a Unique Udyam Registration Number (URN) and an Udyam Certificate, which helps them avail of various government schemes, including tax benefits.

Who Can Apply for Udyam Registration?


Any business that falls under the Micro, Small, and Medium Enterprise (MSME) category can apply.

  • Micro Enterprises: Investment up to Rs. 2.5 crore and turnover up to Rs.10 crore.

  • Small Enterprises: Investment up to Rs. 25 crore and turnover up to Rs. 100 crore.

  • Medium Enterprises: Investment up to Rs.125 crore and turnover up to Rs. 500 crore.


Tax Benefits of Udyam Registration

Udyam-registered businesses enjoy several tax benefits, exemptions, and financial incentives. Here are some of the key advantages:

1. Exemption from Direct Taxes



  • MSMEs registered under Udyam can get exemptions under Income Tax laws.

  • Presumptive Taxation Scheme (PTS) under Section 44AD and 44ADA allows small businesses to pay taxes on a lower percentage of their total income.

  • This scheme reduces the tax burden on MSMEs, helping them save more.


2. GST Benefits and Exemptions



  • Small businesses registered under Udyam may be eligible for GST exemptions.

  • If an MSME’s annual turnover is below ₹40 lakh (for goods) or ₹20 lakh (for services), it may not be required to register under GST.

  • MSMEs can also opt for the GST Composition Scheme, where they pay a lower tax rate and have simpler tax filing requirements.


3. Reduced Tax on Loans and Interest Deductions



  • MSMEs with Udyam Registration get access to collateral-free loans under government schemes like CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises).

  • Interest paid on business loans is deductible from taxable income, reducing overall tax liability.

  • Some loan schemes also offer subsidized interest rates, lowering financial costs.


4. Tax Rebates for Business Expenses


Udyam-registered businesses can claim tax deductions on business expenses, such as:

  • Rent paid for office or factory space

  • Electricity and water bills

  • Employee salaries and benefits

  • Raw material and equipment costs

  • Marketing and advertising expenses


5. Exemption from Certain State Taxes



  • Many state governments provide tax incentives and subsidies to MSMEs with Udyam Registration.

  • These benefits may include exemptions from state-specific taxes like VAT, stamp duty, and electricity duty.

  • Businesses should check their state’s MSME policies to know the available tax benefits.


How to Apply for Udyam Registration Online


Applying for Udyam Registration is simple and free. Follow these steps:

Step 1: Visit the Udyam Registration Portal

  • Open your browser and go to the official Udyam Registration website.


Step 2: Enter Business Details

  • Provide essential business details such as business name, type, address, and bank account information.

  • Ensure all information is accurate and up to date to avoid errors.


Step 3: Review and Submit the Application

  • Double-check all details entered in the form.

  • If everything is correct, apply for processing.


Step 4: Pay the Registration Fee

  • Choose a payment method (Net Banking, UPI, Credit/Debit Card) and complete the transaction.

  • Keep the payment receipt for future reference.


Step 5: Verify OTP for Authentication

  • An OTP (One-Time Password) will be sent to your registered mobile number linked to Aadhaar.

  • Enter the OTP in the portal to confirm and verify your identity.


Step 6: Complete the Registration Process

  • After OTP verification, your business details will be processed and validated by the system.

  • Once approved, your Udyam Registration will be completed.


Step 7: Download Your Udyam Certificate

  • After verification, the Udyam Registration Certificate will be generated.

  • You will receive it via email, and you can download and print it for official use.


Note: Now easily update udyam certificate through the udyam portal

Conclusion


Udyam Registration provides significant tax benefits to MSMEs, including income tax exemptions, GST reductions, loan subsidies, and export incentives. These benefits help small businesses reduce tax liability, save money, and reinvest in growth.

By registering under Udyam, businesses can take full advantage of government support, financial assistance, and simplified tax policies, leading to better profitability and expansion opportunities. If you run an MSME, completing Udyam Registration is a crucial step for business success.

 

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