The Indian government continues its commitment to fostering entrepreneurship and supporting the growth of Micro, Small, and Medium Enterprises (MSMEs). The Union Budget 2025 introduces a range of tax benefits and incentives aimed at reducing financial burdens and encouraging business expansion. This article explores the latest tax incentives designed to support startups and MSMEs in 2025.
To further promote innovation and new business ventures, the government has extended the income tax holiday for eligible startups under Section 80-IAC for another year. Startups incorporated until March 31, 2026, can avail themselves of a 100% tax exemption on profits for any three consecutive years within the first ten years of operation.
Recognizing the importance of small businesses in industrial growth, the government has lowered the corporate tax rate for newly established domestic manufacturing MSMEs. These businesses can now benefit from a reduced tax rate of 15%, down from the standard 25%, thereby lowering the tax burden and promoting industrial expansion.
To simplify tax compliance for small businesses and professionals, the government has raised the presumptive taxation limits under Sections 44AD and 44ADA:
This change reduces compliance costs and eases the tax filing process for eligible entities.
To attract more investments into startups and MSMEs, the government has introduced new investment-friendly measures:
To ease GST-related burdens, new relaxations have been introduced:
To support digital transformation and sustainable business practices, startups in specific industries receive additional tax benefits:
Access to credit has been further facilitated for MSMEs through various initiatives:
The 2025 tax reforms offer significant relief to startups and MSMEs by reducing financial constraints, simplifying compliance, and encouraging investment. Entrepreneurs should leverage these new incentives to optimize their tax planning and accelerate their business growth. By utilizing these schemes, startups and MSMEs can strengthen their financial standing and contribute to India’s economic progress.
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