In order to reduce the compliance burden on small
retailers, traders, shop keepers who comprise the Medium, Small and Micro
Enterprise (MSMEs) sector, the Union Budget proposed to raise by five times the
turnover threshold for audit from the existing Rs. 1 crore to Rs. 5 crores.
While presenting the Union Budget 2020-21 in Parliament today, the Union
Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman said that
in order to boost less cash economy, the increased limit shall apply only to
those businesses which carry out less than 5% of their business transactions in
cash. Currently, businesses having a turnover of more than Rs 1 crore are
required to get their books of accounts audited by an accountant.
In order to give a boost to the start-up ecosystem, the Union
Budget has proposed to ease the burden of taxation on the employees by
deferring the tax payment on ESOPs by five years or till they leave the company
or when they sell their shares, whichever is earlier.
The Finance Minister said that Start-ups, MSMEs have emerged
as engines of growth for the Indian economy. Over the past year, the Government
has taken several measures to handhold them and support their growth. During
their formative years, Start-ups generally use Employee Stock Option Plan
(ESOP) to attract and retain highly talented employees. ESOP is a significant component
of compensation for these employees. Currently, ESOPs are taxable as
perquisites at the time of exercise. This leads to a cash-flow problem for the
employees who do not sell the shares immediately and continue to hold the same
for the long-term.
Further, an eligible Start-up having turnover up to Rs 25
crores is allowed the deduction of 100% of its profits for three consecutive
assessment years out of seven years if the total turnover does not exceed Rs 25
crores. In order to extend this benefit to larger start-ups, the Budget 2020
has proposed to extend the turnover limit from the existing Rs 25 crores to Rs
100 crores. Moreover considering the fact that in the initial years, a start-up
may not have adequate profit to avail of this deduction, the Budget 2020
proposes to extend the period of eligibility for the claim of deduction from
the existing 7 years to 10 years.