BUSY is a simple, yet powerful GST / VAT compliant Business Accounting Software that has everything you need to grow your business.
Finance Minister Nirmala Sitharaman presented the Union Budget 2025, marking her 8th consecutive budget and the first full budget of Prime Minister Narendra Modi’s third term. This budget comes at a critical time, with India’s economic growth at a four-year low and global challenges such as U.S. tariff policies and geopolitical tensions impacting businesses. The government has introduced measures focused on tax relief, infrastructure development, and targeted sectoral reforms to address these pressing concerns.
A major focus of this budget is support for MSMEs, recognized as the second most important engine for economic growth. MSMEs contribute 45% of India’s exports and 36% of manufacturing output, employing over 7.5 crore people. However, they continue to face challenges related to credit access, taxation, and regulatory compliance. The budget introduces several key changes, including revised MSME classification, expanded credit guarantees, and tax benefits, to help businesses grow and remain competitive.
To help you understand the potential impact of Union Budget 2025 on MSMEs, this article breaks down the key budget announcements. Let’s take a look!
The Union Budget 2025 has introduced several tax-related changes to ease the financial burden on MSMEs and help improve their overall competitiveness. Here’s a closer look at the tax reliefs:
The Union Budget 2025 includes significant changes in the individual income tax slabs under the new tax regime, directly benefiting MSME owners who operate as individual taxpayers. Though the new tax regime simplifies the process and reduces rates for individual taxpayers, it does not directly affect the corporate tax rates for MSMEs.
The Goods and Services Tax (GST) compliance regime has long been a major problem for MSMEs due to its complexity and frequent filing requirements. In response to feedback from industry stakeholders, Budget 2025 introduces a series of GST compliance reforms aimed at simplifying GST compliance for MSMEs, such as the adaptation of GST processes to facilitate compliance, reduce paperwork, and lower the tax burden. It also proposes the introduction of digital invoicing for MSMEs to streamline the invoicing process, reduce errors, and make tax filings more efficient.
For MSMEs looking to simplify GST compliance and reduce administrative burdens, BUSY offers a comprehensive suite of tools for efficient GST invoicing, GST filing and returns, auto e-way bill and e-invoices, GST reconciliation, GSTIN verification, and more. Designed especially for MSMEs, BUSY’s user-friendly platform helps businesses stay compliant and focused on growth.
Access to affordable credit has always been a major challenge for MSMEs, especially in a highly competitive market. In Budget 2025, the government has announced several initiatives to expand credit facilities, including enhanced credit guarantee coverage, customized credit cards, and export credit:
The Credit Guarantee Scheme for MSMEs has been significantly enhanced in the Union Budget 2025.:
The Budget also includes a commitment to provide an additional ₹1.5 trillion in MSME loans over the next five years. This ambitious target will help address the funding gap for MSMEs, enabling them to expand operations, invest in new technologies, and employ more staff.
Another noteworthy initiative in Budget 2025 is the introduction of customized credit cards for MSMEs. The government has announced the issuance of credit cards with ₹5 lakh limits for micro-enterprises registered on Udyam, India’s official MSME registration portal.
The government plans to issue 10 lakh such cards to provide easier access to working capital. This will allow MSME owners to manage their day-to-day expenses more efficiently and respond to business opportunities as they arise. This move is especially beneficial for micro-enterprises, which often struggle to access traditional financing channels.
One of the key reforms in Budget 2025 is the revision of MSME classification criteria, aimed at helping more businesses qualify for tax benefits reserved for MSMEs. The new criteria increase both the investment as well as the turnover limits for micro, small, and medium enterprises:
This change will affect over 20 million small and medium enterprises (SMEs). Under the MSME Act of 2006, SMEs are entitled to recover payments within 45 days. If this deadline is not met, the buyer is required to pay three times the bank interest rate for the delayed period. By increasing the limit, more industries will be covered under this scheme, leading to improved financial health for SMEs.
The budget introduces targeted measures for labor-intensive industries, acknowledging the pivotal role MSMEs play in job creation. The MSME sector budget analysis highlights key focus areas:
The budget announces the launch of a National Manufacturing Mission to integrate small, medium, and large enterprises with the Make in India initiative. With a strong focus on Clean Tech manufacturing, the mission seeks to:
The government has allocated ₹2,250 crore for an Export Promotion Mission, led collaboratively by the ministries of commerce, MSME, and finance, to support MSME exporters. This mission will streamline access to export credit, provide cross-border factoring assistance, and help MSMEs overcome non-tariff barriers in international markets.
The Union Budget 2025 introduces new funding schemes for women and SC/ST entrepreneurs to foster inclusivity and financial independence. The government has committed to funding 5 lakh first-time entrepreneurs from marginalized groups, providing loans up to ₹2 crore over five years. This initiative focuses on empowering women and entrepreneurs from disadvantaged communities, enabling them to establish and grow their businesses.
The budget allocation for the MSME Ministry has been increased to ₹23,168 crore, up from ₹17,306 crore in FY25. This increase in funding will support digital transformation, technology adoption, and the creation of MSME infrastructure.
The Union Budget 2025 presents a promising future for MSMEs, with bold reforms in taxation, credit facilities, MSME classifications, and export promotion. While challenges remain, these initiatives offer significant opportunities for MSMEs to thrive in a competitive and evolving global economy.
To help MSMEs adapt to the changes introduced in Union Budget 2025-26, BUSY provides a comprehensive suite of solutions to streamline business operations. With its GST, accounting, and financial management tools, BUSY is the perfect partner for MSMEs looking to stay compliant and efficient in the face of new regulations. Contact us to learn more!
BUSY is a simple, yet powerful GST / VAT compliant Business Accounting Software that has everything you need to grow your business.