Small enterprises to get a boost | india | Hindustan Times
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Small enterprises to get a boost

india Updated: Mar 09, 2012 13:40 IST
Debobrat Ghose
Debobrat Ghose
Hindustan Times
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The government is actively considering offering a slew of tax breaks to encourage investment in small enterprises, particularly lower tax rates for venture funds and private equity firms, to woo them to infuse capital in such enterprises.

Allowing domestic and foreign investors to redeem profits that will be taxed at 15%, against the corporate income tax rate of 30% are among the proposals that the government is considering to announce in the budget for 2012-13.

In order to promote angel investment and early venture investment in micro, small and medium enterprises, the government is considering a proposal to allow such investors to sell equity with profits that will be taxed at around 10-15%, said a government source on the condition of anonymity.

"If any person invests in the equity of a micro and small unit, whether directly or, through buying equity via the proposed SME exchange, the person may be given a 50% set-off in terms of tax for an investment up to a maximum of Rs 2 lakh," the source said.

A sharp jump in the budget allocation for revamping Khadi and Coir boards, and developing industrial clusters is also expected in the budget.

The ministry of MSME has sought Rs 6,300 crore — a 133% hike in the forthcoming budget over last year’s allocation of Rs 2,700 crore.

"The ministry wants to go for equity formation through angel funding for the SMEs from the next fiscal, which will increase credit flow to this sector," a ministry source said.

Laying emphasis on Prime Minister’s Employment Guarantee Programme to generate additional employment, Rs 1,900 crore has been sought against Rs 1,037 crore allocated last year.

For khadi and village industries, and coir board, the ministry has sought R2900 crore — a 60% hike over last year.