Running a small business in India presents numerous challenges, including tight budgets, high competition, and complex paperwork. But did you know there’s a simple way to save money on taxes and access several government benefits? It starts with Udyam Registration.
Udyam Registration Portal is an official recognition from the Ministry of Micro, Small, and Medium Enterprises (MSME). If you run a micro, small, or medium-sized enterprise, this registration helps you gain legitimacy, grow faster, and, most importantly, save money on taxes.
In this article, we’ll break down how Udyam Registration helps you cut your tax burden, what tax exemptions you may qualify for, and how to get started.
What Is Udyam Registration?
Udyam Registration is an online, paperless process launched by the Government of India to bring all MSMEs under a single digital platform. Any business involved in manufacturing, trading, or providing services can apply—whether it’s a shop, startup, factory, or home-based enterprise.
Once registered, your business gets a unique Udyam Registration Number (URN) and a digital certificate, which proves your MSME status. This certificate makes your business eligible for various benefits—especially in the area of taxation.
Why Tax Savings Matter for Small Businesses
Every rupee saved is a rupee earned—especially for small businesses operating on tight margins. Lower tax liability means:
- More working capital to reinvest in operations
- Better cash flow management
- Ability to price products competitively
- Higher profit margins
The Indian government offers multiple tax exemptions and financial incentives to support MSMEs. But these benefits are only available to businesses that have completed Udyam Registration.
Tax Benefits You Get with Udyam Registration
Here’s how Udyam-registered businesses can save on taxes:
1. Exemption from Income Tax under Presumptive Taxation (Section 44AD, 44ADA)
Small businesses with Udyam Registration can opt for presumptive taxation schemes under the Income Tax Act:
- Section 44AD (for businesses): If your turnover is under ₹2 crore, your income is presumed to be 8% (or 6% for digital receipts), and you don’t need to maintain detailed books.
- Section 44ADA (for professionals): If your income is under ₹50 lakh, 50% of it is treated as profit, and the rest is tax-free.
This simplifies filing and reduces your overall tax liability significantly.
2. Deduction for Investment in Plant & Machinery (Section 35AD)
Under Section 35AD, Udyam-registered businesses setting up a new manufacturing unit can claim a 100% deduction on capital expenses for plant and machinery. This means you can recover your investment faster while lowering your taxable income. It’s a great way to save on taxes and grow your business with government-backed financial support.
3. Reduced Tax Rate for New Manufacturing Companies (Section 115BAB)
New domestic manufacturing companies registered as MSMEs can opt for a concessional tax rate of 15% (plus surcharge and cess), under Section 115BAB, significantly lower than the usual 25-30% corporate tax rate.
This is available if your company is set up after October 1, 2019, and begins production before a specified date.
4. Exemption from Tax Audit
Udyam-registered businesses opting for presumptive taxation are exempt from mandatory tax audits, helping you save on audit fees and reduce compliance burden. This benefit applies as long as your total sales stay within the government’s prescribed limits. It’s a smart way to keep things simple and cost-effective while focusing on growing your business.
5. Subsidies and Reimbursements That Are Tax-Exempt
Udyam-registered businesses often receive:
- Interest subsidies on loans
- Reimbursements for ISO certification
- Export promotion subsidies
Many of these are either fully or partially exempt from income tax, reducing the total tax outflow.
6. Ease of Claiming GST and Input Tax Credit (ITC)
Though not an income tax exemption, GST benefits indirectly impact your tax savings. Udyam Registration makes it easier to:
- Claim Input Tax Credit on purchases
- Avoid GST penalties by being classified under the correct business category
- Access composition schemes for small taxpayers
Udyam Registration: One-Time Effort, Long-Term Gains
The best part? You only need to register once, and the benefits continue as long as your business qualifies as an MSME.
Here’s how easy it is to get started:
- Visit the Website: Go to the Udyam Registration portal.
- Fill Out the Form: Enter your basic details in the online form.
- Submit the Form: Review your details and submit the form.
- Payment: Pay the required fee for the registration.
- Receive OTP: You’ll get a one-time password (OTP) on your phone.
- Enter OTP: Enter the OTP to confirm your registration.
- Get Your Certificate: Your Udyam registration certificate will be sent to your email.
Also Read: Section 43B(h) Impact on Micro & Small Enterprises
Conclusion
If you’re a small business owner, Udyam Registration is more than just a government formality—it’s a gateway to substantial tax savings, easier compliance, and smoother access to subsidies and incentives.
By registering today, you’re not just making your business eligible for tax benefits—you’re putting your enterprise on the path to faster, stress-free growth.