Key features of CBDT MoU with MoMSME
On July 20, 2020, the Central Board of Direct Taxes (CBDT) has signed a Memorandum of Understanding (MoU) with the Ministry of Micro, Small and Medium Enterprises (MoMSME).
Key features:
• Sharing Income tax related (ITR) related data
• Two-way exchange of information
• To keep a check and to classify enterprises in MSME category as per the criteria
• Both Ministry of MSME and Income Tax department will appoint Nodal authorities
1. What is a MoU?
Memorandum of Understanding (MoU) is an agreement between the two or more parties that have taken decisions and agreed to enter into a contract. It is made when the parties have outlined the rights and obligations during the initial discussions. However, it is not a legally binding contract.
2. What should taxpayers be aware of?
As per section 138 of the Income Tax Act, the income tax authorities have the power to share information or details about its taxpayers with other government agencies.
After signing the MoU with MoMSME, CBDT will now exchange Income-tax Return (ITR) related information with MoMSME. To be eligible for MSME, the enterprise needs to qualify certain criteria, including depreciation, sales, and gross turnover. They have to submit these details while submitting their respective ITRs (ITR – 3, 4, 5, and 6).
The exchange data will help to ascertain the MSME’s cash flow. It will further ensure that the enterprises are not misusing the government’s concessions.
Therefore, the taxpayers need to ensure to avail the benefit of MSME only if they meet the criteria as per the prescribed MSME definition. Accordingly, they have to submit the accurate details related to:
• Investment in plant and machinery,
• Depreciation claimed
• Annual turnover declared
• Exemptions/Concessions claimed
3. Conclusion
Overall, the purpose of signing MOU between CBDT and MoMSME is to ensure that the MSME benefits must go to those companies that are within the ambit of MSMEs in terms of investment in plant & machinery and turnover. Hence, it will bring more transparency.
Also Read: News about MSME, GST Registration, Company Registration
