Fourteenth Schedule – Small and medium enterprises
Reduced rates on taxable income, or an optional final tax on turnover, for SMEs registered on IRIS or SMERP.
Who it applies to
Manufacturing SMEs with turnover up to Rs 250 million (s.2(59A)), registered on IRIS or SMERP
Rates and limits
| Item | Rate / rule |
|---|---|
| Category 1 – turnover up to Rs 100 million | 7.5% of taxable income, or 0.25% of turnover (final option) |
| Category 2 – Rs 100 to 250 million | 15% of taxable income, or 0.5% of turnover (final option) |
| Minimum tax s.113 | Not applicable |
| Final option lock-in | 3 tax years |
How it works, step by step
The law behind each step is shown beside it.
- 1Register as an SMERule 2
Register on IRIS or on the SMEDA SMERP portal.
- 2Choose a methodRules 3–4
Pay tax on taxable income at the category rate, or opt for final tax on turnover.
- 3Opt in with the returnRule 4(2)
The final-tax option is made when the return is filed and binds you for 3 tax years.
- 4Audit and withholdingRules 4(3), 5, 8
Under the final option, audit (s.177, s.214C) does not apply. Withholding on sales under s.153(1)(a) is not minimum tax.
Worked example
A Category 1 manufacturer with turnover of Rs 80 million and profit of Rs 8 million pays Rs 600,000 at 7.5% of profit, or Rs 200,000 at 0.25% of turnover under the final option.
Points to watch
- Under the normal-law option, an SME whose tax-to-turnover ratio is below the final-tax rates may be selected for audit, capped at 5% of SMEs.
- Check that your business fits the s.2(59A) definition before opting in.