UNIT-5

INSTITUTIONS PROMOTING SMALL BUSINESS ENTERPRISES

Central Level Institutions:

C e n tra l Le ve l In s titu tio n s a re

1 . S ID B I
2 . N S IC
3 . K V IC

SIDBI (SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA):

T h e S ID B I (S m a ll In d u s tries D e ve lo p m en t B a n k o f In d ia ) is a w h o lly-o w n e d s u b s id ia ry
o f ID B I (In d u s tria l D ev elo p m e n t B a n k o f In d ia) , es ta b lis h ed u n d er th e s p e c ia l A c t o f th e
P a rlia m en t 1 9 8 8 w h ic h b e c a m e o p era tiv e fro m A p ril 2 , 1 9 9 0 .

S m a ll In d u s tries D ev elo p m e n t B a n k o f In d ia (S ID B I) is a n in d ep en d en t fin a n c ia l

in s titu tio n a im ed a t a id in g th e g ro w th a n d d ev elo p m e n t o f M ic ro , S m a ll a n d M e d iu m
E n te rp ris e s ( M S M E s ) w h ic h c o n trib u te s ig n if ic a n tly to th e n a tio n a l e c o n o m y in term s
o f p ro d u c tio n , em p lo y m e n t a n d e xp o rts .

● S ID B I w a s e s ta b lis h ed w ith th e m is s io n o f fa c ilita tin g a nd s tre n g th en in g th e

flo w o f c re d it to M ic ro , S m all a n d M ed iu m E nte rp ris e s a n d fo r a d d res s in g th e
d e ve lo p m e n ta l a n d fin a n c ia l g a p s in th e e c o s ys tem o f M S M E s .

● It is a s ta tu to ry b o d y s et u p u n d e r a n a c t o f th e In d ia n P a rlia m en t in 1 9 9 0 .

● F o rm a tio n -A p ril 2 ,1 9 9 0

● H ea d q u a tered -L uc k n o w

● W e b s ite - w w w .s id b i.in

Functions of SIDBI

● It a im s a t em erg in g a s a s in g le-w in d o w to m ee t th e d e ve lo p m e n ta l a n d
fin a n c ia l n ee d s o f M S M E s in o rd er to m a k e th em g lo b a lly c o m p e titive , s tro n g ,
v ib ra n t a n d to p ro tec t th e in s titu tio n a s a c u s to m e r-frie n d ly fin a n c ia l b o d y.

● It a ls o a im s a t en h a n c in g th e w e a lth o f s h a re h o ld e rs th ro u g h th e m o d e rn
tec h n o lo g y p la tfo rm .

● It is in vo lve d in th e p ro m o tio n a n d d ev elo p m en t o f th e M SM E s e c to r.

● It is th e p rin c ip a l ins titu tio n fo r th e d ev elo p m en t, p ro m o tio n a n d f in a n c in g o f

th e M S M E s e c to r a n d fo r c o o rd in a tio n o f fu n c tio n s o f th e in s titu tio n s e n g a g ed
in s im ila r a c tivitie s .
 ● S ID B I re ta in ed its p o s itio n in th e to p 3 0 D ev elo p m e n t B a n k s o f th e W o rld in th e
ra n k in g o f T h e B a n k er, L o n d o n .

● S ID B I a ls o fu n c tio n s a s a N o d a l/ Im p lem e n tin g A g en c y to v a rio u s m in is tries o f

th e G o ve rn m e n t o f In d ia viz ., M in is try o f M S M E , M in is try o f T ex tiles , M in is try o f
C o m m e rc e a n d In d u s try, M in is try o f F o o d P ro c e s s in g a n d In d u s try, etc .

Financial Support of SIDBI to MSMEs

S ID B I p ro vid es fin a n c ia l s u p p o rt to M S M E s in th e f o llo w in g w a ys :

1 . In d ire c t f in a n c in g b y w a y o f ref in a n c in g th e b a n k s , re fin a n c in g fin a n c ia l

in s titu tio n s f o r o n w a rd le n d in g to M SM E s .
2 . D irec t fin a n c in g b y w a y o f s ervic e s ec to r fin a n c in g , rec eiv a b le fin a n c in g , ris k
c a p ita l a n d s u s ta in a b le fin an c in g , e tc .
3 . M ic ro F in a n c e

Objective of SIDBI

T h e m a in o b jec tiv e o f S ID B I is to o ffe r lo a n s to M S M E s to h elp in a d d re s s in g th e

d e ve lo p m e n t a n d fin a nc ia l g a p s in th e e c o s ys te m o f M S M E s . T h e c o m p a n y a im s to
en s u re th a t th e M S M E s ec to r is g lo b a lly c o m p e titiv e, v ib ra n t, a nd s tro n g .

Indirect Loan Schemes Offered under SIDBI

S ID B I a ls o o ffe rs in d irec t lo a n s to v a rio u s b a n k s , N B F C s , a n d o th e r typ e s o f fin a n c ia l

en titie s . T h e in d irec t lo a n s th a t a fin a n c ia l b o d y c a n a v a il fro m S ID B I a re g iv en b e lo w :

1 . Assistance to NBFCs
N o n -B a n k ing F in a n c ia l C o m p a n ies (N B F C s ), A s s et L o a n C o m p a n ie s , o r a n y
fin a n c e c o m p a n y w h ic h is reg is te re d w ith R B I a n d a re e n g a g e d in p ro vid in g
fin a n c e en terp ris e in th e M S M E s e c to r c a n a p p ly fo r a lo a n u n d er S ID B I. T h e
elig ib ility c riteria w ill d e p e n d o n a len d e r to le nd er.

2 . Refinance Scheme
SID B I w ill p ro vid e fin a n c ia l a s s is ta n c e to s c h e d u led b a n k s u n d e r v a rio u s
re fin a nc e s c h em es . S c h ed u le b an k s w ith s tro n g fin a nc ia ls a re e lig ib le fo r
lo a n s u n d er S ID B I.

3 . Assistance to Small Finance Banks (SFBs)

SID B I p ro vid es a s s is ta n c e to th o s e b a n k s b y p ro v id in g e q u ity in ve s tm en ts fo r
c a p ita lis a tio n o f S F B s to m e et th e ir eq u ity g a p . S ID B I h a s a ls o b e en p ro vid in g
re fin a nc e s u p p o rt to M F Is a n d N B F C s p o s t th eir tra n s fo rm a tio n to S B F s .

Steps to apply for a loan from SIDBI

T h ey a re 5 s tep s to a p p ly fo r a lo a n fro m S ID B I
A p p lic a n ts s h o u ld fo llo w th e s tep s m en tio n e d b e lo w to a p p ly fo r a lo a n f ro m S ID B I:

S tep 1 : V is it th e o f fic ia l w eb s ite o f S ID B I

S tep 2 : C lic k o n th e ‘ B o rro w e r’ s C o rn er’ ta b . C lic k o n ‘ O n lin e Lo a n A p p lic a tio n ’ .

S tep 3 : E n te r yo u r u s e rn a m e a n d p a s s w o rd .

S tep 4 : T h e a p p lic a n t h as to th en en te r th e d e s ire d lo a n a m o u n t a n d c h o o s e a s c h e m e .

S tep 5 : T h e a p p lic a n t h a s to e n te r p ers o n a l d eta ils s u c h a s h is /h e r n a m e , u s e rn a m e,

em a il ID , m o b ile n u m b er, b u s in e s s a d d res s , s ta te, d is tric t, e tc . C lic k o n ‘ re g is te r’ to
c o m p lete th e a p p lic a tio n p ro c e s s .

Benefits of availing a loan from SIDBI

Lis ted b e lo w a re th e k ey b en e fits o f a v a ilin g a lo a n fro m SID B I:

● Tailor-made - S ID B I d es ig n s lo a n s a c c o rd ing to th e n ee d s o f y o u r e n terp ris e. If

yo u r n ee d s d o n o t fa ll in to th e u s u a l a n d o rd in a ry c ate g o ry, S ID B I w ill h elp
fu n d yo u in th e rig h t w a y.
● Specialised Size - L o a n s a re a ltered a c c o rd in g to th e s ize o f th e e n te rp ris e. S o
m ic ro , s m a ll a n d m ed iu m e n te rp ris e s c a n g et d iffe ren t lo a n s ta ilo re d to s u it
th e ir b u s in es s .
● Attractive Rates - S ID B I h a s a tie-u p w ith m a n y b a n k s a n d in tern a tio n a l
fin a n c ia l in s titu tio n s a n d c a n g e t c o n c es s io n a l ra tes o f in teres t. T h e tie -u p s
in c lu d e K fW , W o rld B a n k a n d J a p a n Inte rn a tio n a l C o o p e ra tio n A g en c y.
● Assistance - S ID B I d o e s n ’ t ju s t g iv e yo u a lo a n , it a ls o g ive s yo u r a s s is ta n c e
an d m u c h n ee d e d a d vic e. R e la tio n s h ip m a n a g ers h e lp e n trep ren e urs m a k e
th e rig h t d e c is io n s a n d p ro v id e a s s is ta n c e till th e e nd o f th e lo a n p ro c es s .
● Collateral Free - E n tre p ren e u rs c a n g et u p to R s . 1 0 0 la k h s w ith o u t o ffe rin g
c o lla tera l. T h is is d o n e th ro u g h th e es ta b lis h m en t o f a T ru s t c a lle d F u n d
Tru s t fo r M ic ro a n d S m a ll E n te rp ris e s (C G T M S E ) .
● Risk and Growth Capital - W ith o u t d ilu tin g th e o w n ers h ip o f th e c o m p a n y,
en tre p ren e u rs c a n a c q u ire s u ffic ie n t c a p ita l to m e et g ro w th re q u irem en ts .
● Venture and Equity Funding - S ID B I h a s a w h o lly o w ne d s u b s id ia ry c a lled S ID B I
Ve n ture C a p ita l Lim ite d th a t c a n p ro v id e g ro w th c a p ita l in th e fo rm o f e q u ity
th ro u g h v en tu re c a p ita l fu n d s th a t a re fo c u s s ed o n M S M E s .
● Government Subsidies - T a k e a d va n ta g e o f va rio u s s c h e m e s th a t h a ve
c o n c es s io n al ra te s a nd re la xe d te rm s o f fered b y the G o v ern m en t. S ID B I h a s a
w id e r u n d ers ta n d in g a n d in -d e p th k n o w led g e o f lo a n s a n d s c h e m e s a v a ila b le
an d c a n h elp yo u m a k e th e b es t d ec is io n fo r yo u r c o m p a n y.
● Transparency - T h e p ro c es s a n d ra te s tru c tu re is tra n s p a re n t. T h ere a re n o
hid d e n c h a rg es .

NATIONAL SMALL INDUSTRIES CORPORATION (NSIC):

N a tio n a l S m a ll In d us tries C o rp o ra tio n ( N S IC ) w a s e s ta b lis h e d in th e ye a r 1 9 5 5 in o rd er
to p ro m o te , a id a n d fo s te r th e g ro w th o f s m a ll b u s in es s u n its in th e c o u n try.

T yp e -P u b lic s e c to r U n d e ra tk in g
F o u n d ed -1 9 5 5
H ea d q u a rte rs -N e w d e lh i
P a ren t-M in is try o f M S M E
Functions:

T h e fu n c tio n s o f N S IC a re a s fo llo w s : V z

● T o c re a te a w a ren e s s a b o ut tec h no lo g ic a l u p g ra d a tio n .

● T o d ev elo p te c h n o lo g y tra n s fe r c en tres a n d s o ftw a re te c h n o lo g y p a rk s .

● T o e xp o rt th e p ro d u c ts o f s m a ll b u s in es s u n its in o rd er to d e ve lo p e xp o rt
w o rth in e s s .

● T o o b ta in , s u p p ly a n d d is trib u te in d ig en o u s a nd im p o rte d ra w m a te ria ls .

● T o p ro vid e m e n to rin g a n d a d vis o ry s e rv ic e s .

● To s e rve as te c h n o lo g y b u s ine s s in c u b a to rs .
N S IC h a s a ls o in tro d u c ed a n e w s c h e m e o f p erfo rm a n c e a n d c red it ra tin g fo r
s m a ll b u s in e s s es in o rd e r to e n c o u ra g e th em to m ain ta in g o o d fin a n c ia l tra c k
rec o rd a n d to s en s itize th em a b o u t th e n ee d fo r c re d it ra ting .

NSIC Objectives

T h e p rim a ry g o a l o f th e N a tio n a l S m a ll In d u s tries C o rp o ra tio n is to s u p p o rt a n d ra is e

th e S m a ll S c a le In d u s tries . H o w e ve r, it a ls o o p era tes s ev era l a s p ec ts in s u p p o rtin g
M S M E s , in c lu d in g im p ro vin g e ffic ie n c y, p ro fita b ility, m an p o w e r, s k ills u p -g ra d a tio n ,
en h a n c in g s elf-e m p lo ym en t, a n d a lo t m o re .

H ere’ re a fe w o b je c tive s o f th e N S IC .

● T o b u ild c o rp o ra tio n re a c h a n d s u p p o rt in th e s u s ta in a b le g ro w th o f M ic ro ,
S m a ll, a n d M ed iu m E n terp ris e s .

● T o s u p p o rt an d en h a n c e th e w o rk f o rc e in th e in d u s trie s b y up g ra d in g s k ills .

● T o e n s u re a h yg ie n ic w o rk in g en v iro n m e nt.

● T o tra in p e o p le a n d c rea te s e lf-em p lo ym e n t th a t d ev elo p s th e n atio n .

● T o im p ro v e b u s in es s e s ’ effic ie n c y, p ro fits , a n d p ro d u c tivity.

● T o fa c ilita te the M S M E s w ith le a s e eq u ip m en t, h u g e m a c h in ery, a n d ra w

m a te ria ls .
NSIC Schemes

T h e N a tio n a l S m a ll In d u s tries C o rp o ra tio n s u p p o rts M S M E s in tec h n o lo g y , m a rk etin g ,

fin a n c e , a n d o th e r o p era tio n s . It ta ilo rs a s e t o f s c h em e s to in c re a s e c o m p etitiv en e s s
a n d b u s in e s s g ro w th . S o m e o f th e s c h e m e s in c lu d e :

● S in g le P o in t R eg is tra tio n Sc h em e

● P erfo rm a n c e s & C re d it R a tin g S c h em e

● M S M E G lo b a l M a rt

● S k ill & D ev elo p m en t S c h em e

● R a w M ate ria l A s s is ta n c e S c h e m e

● B ill D is c o u n tin g S c h em e

Features & Benefits of NSIC

H ere’ re a fe w fe a tu res a n d b e ne fits o f th e N a tio n a l S m a ll In d u s trie s C o rp o ra tio n th a t

yo u s h o u ld k no w .

● S u p p o rtin g M S M E s th ro u g h lo a n s a n d s c h e m e s .

● M en to rin g d o c u m en ta tio n p ro c e s s es a n d h e lp in g in a ll a s p ec ts o f th e b u s in es s .

● S u p p o rts fin a n c ia lly a t b e s t in teres t ra te s a n d a s s ure s c o m p le te g u id a n c e.

● It o ffe rs c red its a n d p ro v id e s a n o p tio n to s w itc h b a n k s fo r c re d its .

● It o ffe rs ra w m a teria ls , eq u ip m e n t, a n d o th er m a c h in e ry .

● It h elp s in te c h n o lo g y d e ve lo p m e n t a n d s k ills u p g ra d a tio n .

● It p ro v id es tra in in g a n d e n s u re s s elf-e m p lo ym en t fo r p e o p le .

Required Documents for NSIC Registration

T o a v a il o f N S IC b en e fits a n d s c h em es , yo u s h o u ld re g is ter fo r th e N S IC s u b m ittin g th e

req u ired d o c u m en ts as m en tio n e d b e lo w .

● C o p y o f P A N , IS O 9 0 0 0 , B IS L ic e n s e, a n d M S M E re g is tra tio n a c k n o w le d g m e n t

● D e tails o f m a c h in e ry, eq u ip m e n t, ra w m a te ria l a n d o th e r re s o u rc e s , a lo n g w ith

th e p ric e

● C e rtific a te o f In c o rp o ra tio n , M O U , O w n e rs h ip d o c u m e n ts , an d p e rm is s io n d ee d .
 ● T h e la tes t c o p y o f th e ele c tric ity b ill

● F o rm A o r R e g is tra r o f F irm s w ith th e p a rtn er’ s nam e and a d oc um e nt of

d e c la ra tio n f ro m p a rtn er, d irec to r, o r p ro p rie to r.

● Lis t o f ra w m a te ria ls , th e to ta l n u m b er o f e m p lo ye es fo r tec h n ic a l a s s is ta n c e,

a u d ited b a la n c e s h e et, p ro fit a n d lo s s a c c o u n t, a n d tra d in g a c c o u n t.

● P erfo rm a n c e s ta tem e nt

● La s t th re e yea rs a c c o u n ts

Registration Process & Charges

A n y en terp ris e w ith M S M E re g is tra tio n a n d U d yo g A a d h a a r R eg is tra tio n a re e lig ib le fo r

N S IC reg is tra tio n s . T h e reg is tra tio n p ro c e s s c a n b e d o n e eith er o n lin e o r o f flin e b a s ed
o n yo u r p re feren c es .

1 . Offline NSIC Registration Process

● In itia lly, d o w n lo a d th e a p p lic a tio n c o p y a n d f ill u p th e re q u ired d eta ils in th e

fo rm .

● A p p ly to a n y N SIC tec hn ic a l o ffic e s in D elh i, H y d era b ad , C h e n n a i, B a n g a lo re,

K o lk a ta , a n d o th er reg io n s .

● T h en , yo u r a p p lic a tio n is f o rw a rd e d to th e n ea res t s u b -b ra n c h in yo u r en te rp ris e

lo c a lity.

● A f te r a fa vo ra b le rep o rt o n yo u r e n te rp ris e , reg is tra tio n w o u ld b e g ra n ted .

2 . Online NSIC Registration Process

If yo u ’ d lik e to re g is te r o n lin e , fo llo w th e b e lo w -g iv en s tep s .

● Lo g in to th e N a tio n a l S m a ll In d u s trie s C o rp o ra tio n o ffic e p o rta l a n d c lic k o n th e

“ O n lin e R e g is tra tio n fo r G P ” o n th e rig h t-h a n d s id e .

● F ill u p th e fo rm w ith a ll th e req u ire d d eta ils . T h e n , s av e a n d p ro c ee d w ith th e

a p p lic a tio n .

● N ex t, p a y re g is tra tio n c ha rg es a n d u p lo ad s c a n n e d c o p ies .

● F in a lly, s u b m it th e a p p lic a tio n fo r N S IC reg is tra tio n .

3. Registration Charges
T h e re g is tra tio n c h a rg e s d e p e n d u p o n th e b u s in e s s tu rn o v er. B a s e d o n th e a tte s t d a ta
fro m th e N S IC , the re g is tra tio n c h a rg es a re 3 0 0 0 IN R fo r b u s in es s e s w ith a tu rn o ve r o f
les s th a n a c ro re .

B u s in es s e s w ith tu rno ve r o ve r IN R 1 C ro re:

● F o r M ic ro E nte rp ris e s : IN R 3 0 0 0 a n d a n a d d itio n a l IN R 1 5 0 0 fo r e ve ry o th e r o n e

c ro re tu rn o v er.

● F o r S m a ll E n te rp ris e s : IN R 5 0 0 0 a n d a n a d d itio n a l IN R 2 0 0 0 fo r e ve ry o th er o n e
c ro re tu rn o v er.

KHADI AND VILLAGE INDUSTRIES COMMISSION (KVIC)

K h a d i a n d V illa g e In d u s trie s C o m m is s io n (K V IC ) is a s ta tu to ry b o d y es ta b lis h ed in

1 9 5 6 b y a n A c t o f P a rlia m e n t n o . 6 0 (w ith th e la te s t a m e n d m en t b y A c t N o . 1 0 2 0 0 6 ).
K V IC is fu n c tio n in g u n d er th e
G o v ern m e n t o f In d ia .

K h a d i a n d Villa g e In d u s tries C o m m is s io n is a n o n -c o n s titu tio n a l b o d y w h ic h is

in c o rp o ra ted u n d e r th e P a rlia m e n t A c t, p a s s ed b y th e G o v ern m e n t o f In d ia . K V IC a im s
to p la n , p ro m o te, fa c ilita te , o rg a n iz e, a n d a s s is t in the e s tab lis h m e nt a nd d ev elo p m e n t
o f K h a d i a n d V illa g e in d u s trie s in th e ru ra l a re a s . In th is a rtic le, w e f o c u s o n th e
d iff eren t s c h e m e s o rg a n iz ed u n d er th e K h a d i a n d V illa g e In d u s trie s C o m m is s io n
(K V IC ) in d e tail.

Functions of KVIC

T h e fu n c tio n s o f th e K V IC a re as fo llo w s :

● T o b u ild a s tra te g ic re s erve o f ra w m a te ria ls a n d im p le m e n ts fo r s up p ly to

p ro d u c e rs .
● T o c rea te c o m m o n s ervic e fa c ilities f o r p ro c es s in g o f ra w m a teria ls a s
s em i-fin is h ed g o o d s a n d p ro vis io n s o f fa c ilitie s fo r m a rk e tin g o f K V I p ro d u c ts .
● T o en h a n c e th e s ale a n d m a rk etin g o f K h a d i a n d o th e r p ro d u c ts o f villa g e
in d u s trie s o r h a n d ic ra fts .
● T o b e re s p o n s ib le f o r en c o u ra g in g a n d p ro m o tin g res e a rc h in th e p ro d u c tio n
tec h n iq u es a n d e q u ip m en t em p lo ye d in th e K h a d i a n d V illa g e In d u s tries s e c to r.
 ● T o p ro vid e fin a n c ia l a s s is ta n c e to in s titu tio n s a n d in d iv id u a ls fo r d e ve lo p in g
a n d g u id in g K h a d i a n d V illa g e in d u s tries th ro u g h th e s u p p ly o f d es ig n s ,
p ro to typ e a n d o th e r tec h n ic a l in fo rm a tio n .
● T o a s s u re g e n u in en e s s o f th e p ro d u c ts a n d to s et s ta n d a rd s fo r th e q u a lity o f
p ro d u c ts fro m th e K h a d i a n d V illa g e In d u s tries .

KVIC Schemes

T h e fo llo w in g a re th e s c h e m e s c o ve red u n d er th e K h a d i a n d V illa g e In d u s trie s

C o m m is s io n (K V IC ).

● P rim e M in is ter’ s E m p lo ym e n t G en era tio n P ro g ra m m e (P M E G P )

● M a rk e t P ro m o tio n D e ve lo p m en t A s s is ta n c e (M P D A )
● In tere s t S u b s id y E lig ib ility C ertific a te (IS E C )
● W o rk s h e d S c h e m e fo r K ha d i A rtis a n s
● S tre n g th en in g th e in fra s tru c tu re of ex is tin g w ea k K h a d i in s titu tio n s and
a s s is ta n c e fo r m a rk e tin g in fra s tru c tu re
● K h a d i R e fo rm a n d D ev elo p m en t P ro g ra m m e (K R D P )
● S che m e of Fund fo r R e g e n era tio n of T ra d itio n a l In d u s trie s ( S F U R T I)

● H o n e y M is s io n

Objectives of KVIC

● T o p ro m o te K h ad i in ru ra l a re a s
● T o p ro vid e em p lo ym e n t
● T o p ro d u c e s a lea b le a rtic les
● T o c re a te s elf-relia n c e a m o n g s t th e p o o r
● T o b u ild u p a s tro n g ru ra l c o m m u n ity

Features of KVIC

● In tere s t R a te: D e p e n d s o n th e a p p lic a n t’ s p ro file a n d b u s in es s req u ire m e n ts

● Lo a n s o ffe red a re d irec ted a n d g o v ern ed b y P M E G P u n d e r w h ic h is
b e lo w -m en tio n e d c rite ria fo r s p e c ific M S M E s :
● ° Lo a n A m o u n t fo r M a n u fa c tu rin g Se c to r: M a x im u m R s . 2 5 la k h
° L o a n A m o u n t f o r B u s in e s s a n d S e rv ic e S e c to r: M a x im u m R s . 1 0 la k h
● F u n d in g P a tte rn : M en tio n ed b e lo w in P M E G P S c h e m e
● R e p a ym en t T en u re: F ro m 3 yea rs – 7 ye a rs , in c lu d in g 6 m o n th s o f th e
m o ra to riu m p e rio d
● In c o m e C a p p in g : N o c rite ria

Eligibility Criteria for Khadi and Village Industries Commission (KVIC)

KVIC loan can be availed by the following entities:

● In d iv id u a ls o f m in im u m 1 8 yea rs o f a g e w ith 8 th c la s s p a s s c ertific a te

● S elf H elp G ro u p s (S H G s )
● R e g is tered a n d C o -o p era tiv e S o c ietie s
● C h a rita b le T ru s ts a n d m a ny m o re e n tities

STATE LEVEL INSTITUTIONS

State Level Institutions are

1. DIC
2. SFC
3. SIDC

DISTRICT INDUSTRIES CENTER (DIC)

T h e D is tric t In d u s try C en ter (D IC ) u n d er th e D irec to ra te o f In d us tries a n d c o m m e rc e

o f fers a s u b s id y lo a n s c h em e fo r yo u n g p ro fe s s io n a ls u n d er th e g u id a n c e o f th e
M in is try o f S o c ia l J u s tic e a n d E m p o w erm en t. E s ta b lis h e d in 1 9 7 8 , D is tric t In d u s trie s
C e n te rs ’ p ro g ra m w a s in itia ted b y th e c en tra l g o v ern m e n t to p ro m o te tin y, c o tta g e,
v illa g e , a n d S m a ll S c a le In d u s trie s (S S Is ) in s m a lle r to w n s an d th e ir p a rtic u la r a re a s to
m a k e the m a v a ila b le w ith a ll th e b a s ic n e ed s , s ervic es , a n d fa c ilities .

D IC ’ s p rim a ry fo c u s is to g en e ra te em p lo ym e nt in ru ra l reg io n s o f In d ia . D is tric t

In d u s tries C e nte rs a re m a n a g e d a n d o p e ra te d a t th e d is tric t le ve l to p ro vid e a ll th e
n ec es s a ry s u p p o rt s ervic e s to en trep re n eu rs o r firs t-tim e b u s in es s o w n ers to s ta rt
th eir o w n M ic ro S m a ll a n d M ed iu m E n terp ris es ( M S M E s ). D IC s a ls o p ro m o te th e
R e g is tra tio n a n d D e ve lo p m e n t o f In d u s tria l C o o p e rative s .

Eligibility Criteria for applying for loans under DIC

B elo w m en tio n ed a re th e e lig ib le e n titie s w h o c a n a va il lo a n s u n d er th e D IC s c h em e:

● E lig ib le en tities to a v a il th is lo a n in c lu d e s c h e d u le c a s te s , s a fa i k ara m c h a ris

fa m ilie s , a n d o th er b a c k w a rd c la s s e s (O B C s )
● A d d itio n a l e n tities in c lu d e p h ys ic a lly d is a b le d yo u n g p ro fe s s io n a ls , s u c h a s
en g in ee rs , d o c to rs , p a th o lo g is ts , c h a rtered a c c o u n ta n ts , a d vo c a tes ,
p h ys io th e ra p is ts , a n d a rc h itec ts , p ra g m a tis ts , e tc .

Functions of the District Industry Center (DIC)

 ● A rra n g e m e n ts fo r c re d it f a c ilities , m a c h in e ry & eq u ip m e n t
● D e ve lo p m e n t a n d e xp a ns io n o f ind u s tria l c lu s te rs
● Id en tific a tio n o f s u ita b le s c h e m e s
● R e c o g n izin g a n d fin a n c ia lly s u p p o rtin g n e w e n tre p ren e u rs
● P rep a ra tio n o f fe a s ib ility re p o rts

● P ro v id in g fin an c ia l s u p p o rt to s m a ll u n its
● P ro v id in g ra w m a te ria ls

Activities of District Industries Centers

F u rth e r s ta te d a re th e a c tivities p e rf o rm e d b y D IC s :

● D IC s a llo ts s h e d s in E le c tric a l & E le c tro n ic In d u s tria l E s ta tes

● P ro v id es c le a ra n c e o f lic e n s es etc . th ro u g h Sin g le W in d o w M e etin g
● C o n d u c ts M o tiva tio n a l C a m p a ig n s
● H elp s in th e d is trib u tio n o f P ro jec t p ro file s a m o n g en tre p re ne u rs
● G ra n ts s u b s id ies to S m a ll S c a le In d u s tries (S S Is ) u n its
● Im p le m e n ts Prime Minister’s Rozgar Yojana (PMRY)
● P ro v id es m a rk e tin g and ra w m a te ria l a s s is ta n c e v ia S m a ll In d u s trie s
D e ve lo p m e n t C o rp o ra tio n (S ID C O )
● O rg a n iz es In d us tria l C o o p era tiv e S o c ieties
● R e c o m m e n d s A w a rd s to S S I u n its a n d lo a n a p p lic a tio n s to b a n k s u n d er KVIC
Scheme
● H elp s in R eg is tra tio n of H a n d ic ra fts / C o tta g e in d u s trie s & SSI u n its
(P e rm a n en t/P ro v is io n a l)
● P ro v id es reh a b ilita tio n o f s ic k S S I u n its
● U n d erta k es tra in in g p ro g ra m s fo r E n trep re n eu r D ev elo p m en t

Additional Functions of District Industries Centers

D is c u s s ed b elo w a re s o m e a d d itio n al fu n c tio n s o f D IC s :

1. Loan Arrangement

D IC s a rra n g e lo a n s w ith fin a n c ia l in s titu tio n s lik e b a n k s , N B F C s , M F Is , etc . to

p ro vid e fu n d in g a s s is ta n c e to e n tre p ren e u rs . T h ey a ls o m o n ito r th e flo w o f
in d u s tria l c red it, d is tric t-w is e.

2. Undertakes Training Courses

 D IC s c o n d u c t tra in in g c o u rs e s fo r th e en trep re n eu rs o f s m a ll a n d tin y u n its .
T ra in in g c o u rs e s h elp e n tre p ren e u rs to d e ve lo p n e w p ro d u c ts w ith b ette r
q u a lity a n d p erfo rm a n c e .
3. Machinery and Equipment
D IC s d e s ig n a te th e lo c a tio n s fro m w h ere th e m a c h in ery a n d e q u ip m en t c a n b e
a c q u ire d . T h e y a ls o a rra n g e fo r m a c h in ery s u p p ly o n a h ire p u rc h a s e b a s is .
4. Conducts Surveys
D IC s c o n d u c t s u rve ys o f ex is tin g in d u s trie s , tra d itio n a l in d u s tries , ra w m a teria ls ,
a n d h u m a n re s o u rc e s . T h e s e in d u s tries a ls o p ro vid e fo re c a s tin g o f n u m e ro u s
p ro d u c ts rela te d to th e s p e c ific in d u s trie s .
5. Promoting rural artisans
D IC s h a v e h e lp e d in th e p ro m o tio n o f ru ra l a rtis a n s b y w o rk ing c lo s ely w ith
S m a ll S c a le In d us tries . T h ey h a ve a ls o w o rk e d fo r th e d ev elo p m en t o f k h a d i
a n d v illa g e in d u s tries a n d o rg a n iz ed tra in in g p ro g ra m s fo r ru ra l a rtis an s .

SFC – STATE FINANCE CORPORATION

T he State F in a nc e C o rp o ratio n s (SF C s ) are a n in teg ra l p a rt o f ins titu tio n al fin a nc e

s tru c ture o f a c o un try. W h ere S E C p ro m o tes sm all an d m ed iu m in d u stries o f the states .
B esid es , S FC h elp in ens u ring b alan c ed reg io na l d ev elo p m en t, h ig h er in ves tm e nt,
m o re em p lo ym en t g en era tio n an d b ro a d o w n ers h ip o f v ario u s ind u s tries .

A t p rese nt in In d ia , the re are 1 8 state fina n c e c o rp o ra tio ns (o ut o f w h ic h 1 7 SF C s w ere

es ta b lis he d u n d er th e SF C A c t 1 9 5 1 ). Ta m il N a d u In d u s tria l Inve stm en t C o rp o ra tio n Ltd .
w h ic h is estab lish ed u n d er the C o m p an y A c t, 1 9 4 9 , is a lso w o rk ing a s state fin a nc e
c o rp o ra tio n .

Functions of State Finance Corporations

T he va rio us im p o rta n t fu n c tio n s o f S ta te F in an c e C o rp o ra tio ns are:

(i) T h e S FC s p ro vid es lo an s m a in ly fo r th e a c q u is itio n o f fixed as s ets lik e lan d , b uild ing ,

p lan t, an d m a c h in ery.

(ii) T h e SF C s h elp fina n c ia l a s sista nc e to in d us tria l u n its w h o s e p aid -u p c ap ita l a nd

re serves d o no t exc ee d R s. 3 c ro re (o r s u c h h ig her lim it u p to R s . 3 0 c ro res as m a y b e
n o tified b y th e c en tral g o v ern m en t).

(iii) Th e S F C s u nd e rw rite n ew s to c k s , s h ares , d eb entures etc ., o f in d u strial u n its .

(iv ) Th e S FC s g ran t g ua ra n tee lo a n s rais ed in the c ap ita l m a rk et b y s c h ed u led b a nk s ,
in d u s tria l c o nc ern s , a nd s ta te c o -o p erative b a n ks to b e rep a ya b le w ithin 2 0 yea rs .

Problems of State Financial Corporations

No Independent Organization

A ll S F C s a re d ep en d en t up o n th e ru les a n d reg u la tio ns m a d e b y th e s ta te g o v ern m en t.

S FC s ’ p ro b lem is tha t a ll d e c is io n o f th es e ins titu tio ns is d ep en d en t o n th e p o litic a l
en viro n m en t o f the s ta te.
D u e to this , th e lo a n is no t a va ilab le at the rig h t tim e fo r th e rig ht p e rs o n.

Corruption

Like o th er g o ve rn m en t o ffic es o f o ur c o u n try, w e c an a lso se e th e evil o f c o rrup tio n in

s ta te fin an c ial c o rp o ratio n .
H o ard in g o f w ea lth a n d m o n ey, S F C s’ o ffic e r o b je c t h a s b ec o m e to e arn b y a g o o d o r
b a d w a y.
T ha t is the p ro b le m tha t th es e in stitu tio n s h ave n o p ro p er tra ns p a ren c y lik e b an k s.

S IDC - STATES INDUSTRIAL DEVELOPMENT CORPORATION

T h e f u ll fo rm o f S ID C o r S ID C s is S ta te In d u s tria l D ev elo p m en t C o rp o ra tio n s . It w a s

firs t e s tab lis h e d in 1 9 9 5 u n d e r th e C o m p a n ie s A c t, 1 9 5 6 . T h ey a re s ta te-o w n ed
g o ve rn m e n t c o rp o ra tio n s th a t e n g a g e in th e d ev elo p m e n t a n d p ro m o tio n o f m e d iu m
a n d la rg e in d u s trie s . S ID C s a im to d e ve lo p in d u s tria l in fra s tru c tu re s u c h a s in d u s tria l
p a rk s a n d in d u s tria l e s ta tes a lo n g w ith p ro v id in g f in a n c ia l a s s is ta n c e . T h e y s et u p
in d u s tria l p ro jec ts e ith e r in jo in t s ec to r c o lla b o ra tio n w ith p riva te e n tre p ren e u rs o r o n
th eir o w n . T h ey a ls o s e t u p s u c h p ro je c ts a s w h o lly-o w n ed s u b s id ia ries . T h ey p ro v id e
lo a n s to s e ve ral ind u s tria l u n its in m e d iu m a n d la rg e s ec to rs a t a n in te re s t ra te th a t
ra n g e s fro m 1 3 .5 % to 1 7 % a c c o rd in g to th e s iz e o f th e lo a n .
Some of the SIDCs are:-
● J a m m u a n d K a s h m ir S ta te In d u s tria l D e ve lo p m e n t C o rp o ra tio n
● T a m il N a d u S ta te In d u s tria l D ev elo p m en t C o rp o ra tio n
● K era la S ta te In d u s tria l D ev elo p m e n t C o rp o ra tio n

Objectives of SIDC
T h e m a in o b je c tive s o f S ID C are a s fo llo w s :-
● S ID C a im s to p ro m o te m ic ro , s m a ll a n d m ed iu m en te rp ris e s .
● It a id s in th e es ta b lis h m en t o f en trep re n eu rs h ip a n d s k ill d e ve lo p m e n t.
● It h elp s in fa c ilita ting in d u s tria l in fra s tru c tu re d ev elo p m e n t.
● It a im s a t p ro vid in g p u b lic ity a n d m a rk etin g s u p p o rt to in d u s trie s .
Functions of State Industrial Development Corporation

(i) T o p ro vid e ris k c a p ita l to en trep re n eu rs b y w a y o f eq u ity p a rtic ip a tio n a n d s e ed

c a p ita l a s s is ta n c e.

(ii) T o p ro vid e fin a n c ia l a s s is ta n c e in the fo rm o f te rm lo a n s , u n d er w ritin g d irec t

s u b s c rip tio n to s h a res / d e b e n tu re s a n d g u a ra n te es .

iii) T o a d m in is ter in c en tive s c h em es o f C en tra l/ S tate G o v ern m e n ts .

(iv) To u n d e rta k e p ro m o tio n a l a c tivities lik e p re p a ra tio n of fea s ib ility rep o rts ,
c o n d u c tin g in d u s trial p o te n tia l s u rv eys , e n tre p ren e u rs h ip d ev elo p m e n t p ro g ra m m e s
a n d d ev elo p in g in d u s tria l e s ta te s .

(v ) S o m e S ID C s o ffe r a p a c k a g e o f d e ve lo p m en ta l s ervic e s s u c h a s te c h n ic a l g u i

Government Policies for Development and Promotion of Small-Scale

Industries in India

In In d ia , S m a ll-s c a le e n te rp ris es ha v e b e en g iv en a n im p o rta nt p la c e fo r b o th

id e o lo g ic a l a n d ec o n o m ic rea s o n s . It is w ell d o c u m e n te d th a t th e s m a ll s c a le
in d u s trie s h a ve a n im p o rta n t ro le in th e d ev elo p m en t o f th e c o u n try. It c o n trib u te s
a lm o s t 4 0 % o f th e g ro s s in d u s tria l va lu e a d d ed in th e In d ia n e c o n o m y. G o v ern m en t's
a p p ro a c h a n d in ten tio n to w a rd s in d u s tries in g en e ra l a n d S S Is in p a rtic u la r a re
rev ea led in In d u s trial p o lic y R es o lutio n s . T h e re a re m a n y G o v ern m e n t P o lic ie s fo r
d e ve lo p m e n t a n d p ro m o tio n o f S m a ll-S c a le In d u s trie s in In d ia . T h es e a re m e n tio n ed
a s b e lo w :

1 . In d u s tria l P o lic y R e s o lu tio n ( IP R ) 1 9 4 8

2 . In d u s tria l P o lic y R e s o lu tio n ( IP R ) 1 9 5 6
3 . In d u s tria l P o lic y R e s o lu tio n ( IP R ) 1 9 7 7
4 . In d u s tria l P o lic y R e s o lu tio n ( IP R ) 1 9 8 0
5 . In d u s tria l P o lic y R e s o lu tio n ( IP R ) 1 9 9 0
6 . In d u s tria l P o lic y R e s o lu tio n ( IP R ) 1 9 9 1
7 . In d u s tria l P o lic y R e s o lu tio n ( IP R ) 2 0 0 0
8 . In d u s tria l P o lic y R e s o lu tio n ( IP R ) 2 0 0 1 -2 0 0 2
9 . In d u s tria l P o lic y R e s o lu tio n ( IP R ) 2 0 0 3 -2 0 0 4
1 0 . In d u s tria l P o lic y R e s o lu tio n ( IP R ) 2 0 0 4 -2 0 0 5
1 1 . In d u s tria l P o lic y R e s o lu tio n ( IP R ) 2 0 0 5 -2 0 0 6
1. Industrial Policy Resolution (IPR) 1948:

T h e IPR , 1 9 4 8 fo r th e firs t tim e , a c c ep te d th e im p o rta n c e o f s m a ll-s c a le in d u s trie s in

th e o ve ra ll in d u s tria l d ev elo p m en t o f th e c o u n try. It w a s w ell re a liz ed th a t s m a ll-s c a le

in d u s trie s a re p a rtic u la rly s u ite d fo r th e u tiliza tio n o f lo c a l res o u rc es a n d fo r c re a tio n

o f e m p lo ym en t o p p o rtu n ities .

2. Industrial Policy Resolution (IPR) 1956:

T h e m a in c o n trib u tio n o f th e IP R 1 9 4 8 w a s th a t it s e t in th e n a tu re a n d p a tte rn o f

in d u s tria l d e ve lo p m en t in th e c o u ntry. T h e p o s t-IP R 1 9 4 8 p erio d w a s m a rk ed b y

s ig n ific a n t d e ve lo p m en ts ta k e n p la c e in th e c o u n try. F o r e xa m p le , p la n n in g h a s

p ro c e ed e d o n a n o rg a n is e d m a n n er a n d th e F irs t F ive Y ea r P la n 1 9 5 1 -5 6 ha d b ee n

c o m p leted . In d u s tries (D e ve lo p m e n t a n d R e g u la tio n ) A c t, 1 9 5 1 w a s a ls o in tro d u c ed to

reg u la te a n d c o n tro l in d u s tries in th e c o u n try.

3. Industrial Policy Resolution (IPR) 1977:

D u rin g th e tw o d e c a d es a fte r th e IP R 1 9 5 6 , th e e c o n o m y w itn e s s ed lo p s id ed in d u s tria l

d e ve lo p m e n t s k ew e d in fa vo u r o f la rg e a n d m ed iu m s e c to r, o n th e o n e h a n d , a n d

d e c re a s e in u n e m p lo ym en t, o n th e o th er. T h is s itu a tio n led to a ren e w ed e m p h a s is o n

in d u s tria l p o lic y. T h is g a v e e m e rg en c e to IP R 1 9 7 7 .

4. Industrial Policy Resolution (IPR) 1980:

T h e G o v ern m en t o f In d ia a d o p ted a n e w In d u s trial Po lic y R es o lu tio n ( IP R ) o n J u ly 2 3 ,

1 9 8 0 . T h e m a in o b je c tive o f IP R 1 9 8 0 w a s d e fin ed a s fa c ilita tin g a n in c re a s e in

in d u s tria l p ro d u c tio n th ro u g h o p tim u m u tiliz a tio n o f in s ta lle d c a p a c ity a n d e xp an s io n

o f in d us tries .

5. Industrial Policy Resolution (IPR) 1990:

T h e IP R 1 9 9 0 w a s a n n o u n c e d d u rin g J u n e 1 9 9 0 . A s to th e s m all-s c a le s e c to r, th e

res o lu tio n c o n tin u e d to g iv e in c rea s in g im p o rta n c e to s m a ll-s c a le e n te rp ris e s to s e rve

th e o b je c tiv e o f em p lo ym en t g e n era tio n .

6.Industrial Policy Resolution (IPR) 1991:

D u rin g A u g 1 9 9 1 ,th e g o ve rn m en t o f In d ia is s u e d a n e w p o lic y f o r s m a ll s c a le

en te rp ris e titled p o lic y m e as u re s fo r p ro m o tin g a n d s tre n g th en in g a n d s u p p le m e n tin g

s m a ll, tin y a n d villa g e en te rp ris e s .

T h e s a lien t f ea tu re s :

o In c re a s e in in v es tm en t

o P rio rity to s m a ll a n d tin y s ec to r

o In tro d u c tio n o f s erv ic es

7.IPR 2000:

T h e m a in fo c u s o f th is p o lic y a re

● T h e e xe m p tio n o f e xc is e d u ty lim it ra is ed f ro m 5 0 la k h s to 1 c ro re to im p ro ve
th e c o m p etitiv en e s s
8. IPR 2001-2002:
T h is p o lic y e m p h a s iz es th e fo llo w in g
● In v es tm en t lim it w as e n h a n c e d fro m 1 c ro re to 5 c ro re s
● M a rk e t d ev elo p m e n t a s s is ta n c e s c h em e w a s la u n c h ed
9. IPR 2003-2004:
T h e fo llo w in g a re th e h ig h lig h ts o f th is p o lic y:
● S ele c tive e n h a n c e m e n t o f in v es tm en t in p la n t a n d m a c h in e ry
● B a n k s w e re d irec te d to p ro v id e c re d it to S S I

10.IPR 2004-2005:

● N a tio n a l c o m m is s io n o n e n te rp ris e w a s s et u p in s ep ,2 0 0 4
● 8 5 ite m s w ere d e-res e rve d in o c t,2 0 0 4
● P ro m o tio n a l p a c k a g e fo r s m a ll en terp ris es w ere in itia ted

11.IPR 2005-2006:

● Ministry of SSI has identified 180 items for deservation

● Tax concessions
● Technological facilities have been increased

TAX BENEFITS

S o m e o f th e ta x b en e fits a v a ila b le to s m a ll s c a le in d u s tries in In d ia a re :

1 . Tax holiday - T h e s m a ll s c a le in d u s tries n e ed n o t p ay in c o m e ta x o n a c e rta in

p e rc e n ta g e o f p ro fits fo r fiv e yea rs fro m th e d a te o f c o m m e n c e m e n t o f p ro d u c tio n .
2 . Depreciation - T h ey a re e n titled to a d ed u c tio n o f m a x im u m R s . 2 0 la k h s fo r
d e p re c ia tio n o n p la n t a n d m a c h in ery.

3 . Rehabilitation allowance - A reh a b ilita tio n a llo w a n c e is g ra n ted to th em in c a s e

th eir b u s in es s is d is c o n tin u ed d u e to a n a tu ra l c a la m ity, c iv il d is tu rb a n c e o r a c c id en ta l
fire.

4 . Investment allowance - T h e y a re g ive n a n in ve s tm e n t a llo w a n c e a t th e ra te o f 2 5 %

o f th e c o s t o f a c q u is itio n o r in s ta lla tio n o f a n e w p la n t o r m a c h ine ry.

5 . Expenditure on scientific research - T h ey a re en title d to d ed u c tio n s in res p ec t o f

ex p e n d itu re o n s c ie ntific res e a rc h .

6 . Amortization of preliminary expenses - T h e y a re a llo w ed to w rite o ff th eir

p re lim ina ry a n d d e ve lo p m e n ta l ex p e n s es .

7 . In the backward or rural area - A s m a ll s c a le u n it s et u p in a b a c k w a rd o r ru ra l are a

is g ive n a d ed uc tio n o f 2 0 % o n its p ro fits .

8 . Expenditure on acquisition of patents and copyrights-E xp en d itu re in c u rre d b y th e

s m a ll s c a le in d u s trie s in o b ta in in g a p a ten t a n d c o p yrig h t is d e d u c tib le f ro m th eir
in c o m e .

9 . Profits from business of publication of books-If a s m a ll s c a le in d u s try e a rn s p ro fits

fro m th e p u b lic a tio n o f b o o k s , 2 0 % o f th e p ro f its e a rn e d c a n b e d e d u c te d f ro m th e
g ro s s to ta l in c o m e.

1 0 . D e d u c tio n s c a n a ls o b e a va iled fo r ro ya lties fro m a n y c o m p a n y in In d ia , ro ya ltie s

fro m c ertain f o reig n c o m p a n ie s , in ter-c o rp o ra te d ivid en d s , in c o m e o f c o -o p e ra tive
s o c ieties a n d c a rry fo rw a rd a n d s et-o f f b u s in es s lo s s e s .

Tax Benefits to Small-Scale Industries

Some of the tax benefits available to Small-Scale Industries in India are as follows:

Tax Holiday:

U n d er s ec tio n 8 0 J o f th e In c o m e T a x A c t 1 9 6 1 , n ew in d u s tria l u nd erta k in g s , in c lu d in g

s m a ll-s c a le in d u s trie s , a re ex em p ted fro m th e p a ym en t o f in c o m e- ta x o n th e ir p ro fits

s u b jec t to a m a xim u m o f 6 % p e r a n n u m o f th eir c a p ita l em p lo yed . T his ex em p tio n in

ta x is a llo w e d fo r a p erio d o f five yea rs fro m th e c o m m e n c e m e n t o f p ro d u c tio n .

A small-scale industry has to satisfy the following two conditions to avail of this tax

exemption facility:

1 . T h e u n it s h o u ld n o t h a v e b ee n f o rm e d b y th e s p littin g o r re c o n s tru c tio n o f a n

ex is tin g u n it.

2 . T h e u n it s h o u ld em p lo y 1 0 o r m o re w o rk ers in a m a n u fa c tu ring p ro c es s w ith th e

p o w er o r a t lea s t 2 0 w o rk ers w ith o ut p o w er.

Depreciation:

U n d er S ec tio n 3 2 o f th e In c o m e Ta x A c t, 1 9 6 1 , a s m a ll-s c a le in d u s try is e n titled to a

d e d u c tio n o n d ep rec ia tio n a c c o u n t o n b lo c k o f a s s e ts a t th e p re s c rib e d ra te. Sm a ll

en te rp ris e is a llo w ed s u b je c t to a m a x im u m o f R s . 2 0 la k h d e d u c tio n fo r d e p re c ia tio n

o n p la n t a n d m a c h in ery o n th e d im in is h in g b a la n c e m e th o d .

In c a s e o f a n a s s e t a c q u ire d b e fo re th e a c c o u n tin g p e rio d , d e p re c ia tio n is c a lc u la ted

o n its w ritten d o w n v a lu e . F o r p la n t a n d m a c h in ery th a t a re u s ed in m a n u fa c tu rin g in

d o u b le o r trip le s h ift, a n a d d itio n a l a llo w a n c e c a lle d ‘ E xtra S h if t A llo w a n c e’ is a ls o

a va ila b le .

A small-scale industry should satisfy the following conditions before it becomes

eligible for deduction in depreciation:

1 . T h e a s s ets m u s t b e o w n e d b y th e a s s e s s ee .

2 . T he a s s ets m u s t a c tu a lly b e u s ed f o r th e p u rp o s e o f th e a s s es s e e’ s b u s in e s s o r

p ro fes s io n .

3 . D e p rec ia tio n s allo w a n c e o r d ed u c tio n is a llo w ed o nly o n fixe d a s s ets , i.e . b uild in g

m a c h in ery, p la n t a n d fu rnitu re.

Rehabilitation Allowance:
A rehabilitation allowance is granted to small-scale industries under Section 33-B of

the Income Tax Act, 1961 whose business is discontinued on account of the

following reasons:

1 . F lo o d , typ h o o n , h u rric a n e , c yc lo n e, e a rth q ua k e , o r o th er n a tu ra l u p h ea v a ls ;

2 . R io t o r c ivil d is tu rb a n c e;

3 . A c c id en ta l fire o r e xp lo s io n ; a n d

4 . A c tio n b y a n en e m y o r a c tio n ta k en in c o m b a tin g a n en e m y.

T h e re h a b ilita tio n a llo w a n c e s h o u ld b e u s ed fo r b u s ine s s p u rp o s e s w ith in th re e ye a rs

o f u n it’ s re -es ta b lis h m en t, rec o n s tru c tio n , o r re viv a l .T h e re h a b ilita tio n a llo w a n c e is

a llo w ed to th e u n it eq u iva len t o f 6 0 p e r c e n t o f th e am o u nt o f th e d ed u c tio n a llo w a b le

to th e u n it.

Investment Allowance:

T h e In ve s tm en t a llo w a n c e w a s in tro d u c ed w a y b a c k in 1 9 7 6 to re p la c e th e in itia l

d e p re c ia tio n a llo w a n c e . T he in v es tm en t a llo w a n c e un d er S ec tio n 3 1 A o f th e In c o m e

T a x A c t, 1 9 6 1 is a llo w e d a t th e ra te o f 2 5 p er c e n t o f th e c o s t o f a c q u is itio n o f n e w

p la n t o r m a c hin e ry in s ta lle d .

Expenditure on Scientific Research:

Under Section 35 of the Income Tax Act, 1961, the following deductions in respect of

expenditure on scientific research are allowed:

1 . A n y re ve n ue e xp en d itu re in c u rred o n s c ien tific res e a rc h rela ted to th e b u s in e s s o f

th e a s s es s e e in th e p rev io u s ye a r.

2 . A n y s um p a id to a s c ien tific res e a rc h a s s o c ia tio n o r a u n ive rs ity, c o lleg e , in s titu tio n

o r to a p u b lic c o m p a n y w h ic h h a s its o b jec t, th e u n d e rta k in g o f a s c ien tif ic re s ea rc h .

3 . A n y c a p ita l e xp en d itu re in c u rred o n s c ien tif ic re s ea rc h rela ted to th e b u s in e s s o f the

a s s es s e e s u b jec t to th e p ro vis io n o f S e c tio n 3 5 ( 2 ) o f th e In c o m e T a x A c t, 1 9 6 1 .

In c a s e o f a n y u na b s o rb e d c a p ita l e xp en d itu re in c u rred o n s c ie n tific re s ea rc h , th e

p ro vis io n o f th e In c o m e T a x A c t a llo w to c a rry it f o rw a rd fo r a d ju s tm en t a g a in s t th e

p ro fits ea rn ed b y th e b u s in es s in th e s ub s eq u en t yea rs fo r a n in d e fin ite tim e p e rio d .

Tax Concession to Small-Scale Industries in Rural Areas:

T h e F in a n c e ( N o .2 ) A c t o f 1 9 7 7 in s e rte d a ne w S ec tio n 8 0 -H H A in th e In c o m e T a x A c t,

1 9 6 1 . T h e ta x p a ye rs , u n d er th is S ec tio n 8 0 -H H A , a re en title d to a d ed u c tio n o f 2 0 % o f

th e p ro f its a n d g a in s d e riv ed b y ru n n in g s m a ll-s c a le in d u s trie s in the ru ra l are a s .

T h e d ed u c tio n is a llo w e d fo r a p erio d o f 1 0 yea rs fro m th e ye a r o f c o m m en c em en t o f

m a n u fa c tu rin g a c tiv ity a f te r 3 0 th S e p tem b e r 1 9 7 7 . F o r th is p u rp o s e, th e ex p res s io n

ru ra l a re a m e a n s a n y a re a a s d efin e d u n d er th e E x p la n a tio n to S e c tio n 3 5 C C (I) o f th e

In c o m e T a x A c t, 1 9 6 1 . H o w ev er, th is ta x d ed u c tio n b e n efit is n o t a llo w ed to th e

s m a ll-s c a le u n its en g a g e d in m in in g a c tivity .

The small-scale industry can avail of this tax deduction only after fulfilling the

following conditions:

1 . T h e s m a ll-s c a le u n it is n o t f o rm e d b y s p littin g o r re c o n s tru c tio n o f a b u s in e s s

a lre a d y in ex is ten c e.

2. ‘ It is n o t fo rm ed b y th e tra ns f er to a n ew b u s in e s s o f m a c h in e ry o r p la n t p rev io u s ly

u s ed fo r a n y p u rp o s e .

3 . T h e a c c o u n ts o f th e un it a re au d ite d b y a c h a rtered a c c o u n tan t.

4 . It e m p lo ys 1 0 o r m o re w o rk ers in m a n u fa c tu rin g p ro c e s s c a rrie d o n w ith o u t th e a id

o f p o w er.
5 . T h e u n it d o e s n o t c la im a s im u lta n eo u s d ed u c tio n u n d er S ec tio n 8 0 -H H o f th e

In c o m e T a x A c t, 1 9 6 1 .

Tax Concessions to Small-Scale Industries in Backward Areas:

T h e P la n n in g C o m m is s io n o f In d ia , in 1 9 7 0 -7 1 , d ec la re d 2 4 7 d is tric ts o u t o f 4 3 5

d is tric ts a s b a c k w a rd a re a s w ith a vie w to p ro vid e the m s p ec ia l in c e n tiv es a n d

c o n c e s s io n s to es ta b lis h in d u s tries in th e s e b a c k w a rd a re a s . T h e n ew ly es ta b lis h ed

s m a ll-s c a le in d u s tries in th es e a re a s s p ec if ie d in th e E ig h th S c h e d u le to th e In c o m e

T a x A c t, 1 9 6 1 are e n titled to a d ed u c tio n o f 2 0 % o f th e ir p ro fits a n d g a in s fro m th eir

g ro s s to ta l in c o m e.

T h is d ed u c tio n is a llo w e d fo r a p erio d o f 1 0 yea rs b e g in n in g w ith th e yea r o f

c o m m e n c e m e n t o f m a n u fa c tu re o r p ro d uc tio n . H o w e ve r, if a s m all-s c a le in d u s try h a s

a lre a d y b ee n es ta b lis h ed in a n o n -b a c k w a rd a rea a n d la ter s h ifted to b a c k w a rd a rea ,

th e u n it w ill b e a llo w e d th is d ed u c tio n o n th e p ro fits ea rn e d fro m th e u n d e rta k in g a fte r

s h iftin g in th e b a c k w a rd are a fo r a p e rio d o f 1 0 ye a rs . A s m a ll-s c a le in d u s try

es ta b lis h e d in b a c k w a rd a re a b ut en g a g ed in m in in g a c tiv ity is n o t e n title d to s u c h

d e d u c tio n b en e fit.

The unit has to satisfy the following conditions to be eligible to avail of this tax

benefit:

1 . It is es ta b lis h ed o n o r a f te r 3 1 th D ec em b e r, 1 9 7 0 .

2 . It e m p lo ys a t lea s t 1 0 w o rk e rs in a m a n u fa c tu rin g p ro c es s c a rried o n w ith th e a id o f

p o w er o r a t le a s t 2 0 w o rk ers m a n u fa c tu rin g p ro c e s s c arried o n w ith o u t th e aid o f

p o w er.

Expenditure on Acquisition of Patents and Copyrights:

U n d er Se c tio n 3 5 -A o f th e In c o m e T a x A c t, 1 9 6 1 , a n y ex p en d itu re o f c a p ita l n a tu re

in c u rred in a c q u iring a p a te n t a n d c o p yrig h t b y a s m a ll-s c a le in d u s try is d e d u c tib le

fro m its in c o m e . B u t th e ex p e n d itu re s h o u ld b e in c u rred a fter 2 8 th F e b ru a ry 1 9 6 6 . T h e

ex p e n d itu re c a n b e d ed u c ted in 1 4 eq u a l in s tallm en ts b eg in n in g w ith th e p re vio u s ye a r

in w h ic h th e e xp e n d itu re w a s in c u rred in a c q u irin g p a te n ts a n d c o p y rig h ts fo r the u n it.

Profits from Business of Publication of Books:

U n d er S ec tio n 8 0 -1 A o f th e In c o m e T a x A c t, 1 9 6 1 w h ic h h a s re p la c ed S e c tio n 8 0 -1 w .e.

f. th e a s s es s m en t ye a r 1 9 9 1 -9 2 , 2 0 % o f th e p ro f its e a rn e d b y a s m a ll- s c a le in d u s try

fro m th e b u s in es s o f p u b lic atio n o f b o o k s is d ed u c tib le fro m its g ro s s to tal in c o m e.

T h e d e d u c tio n b e n efit is a v a ila b le fo r to ta l p e rio d o f f iv e yea rs b eg in n in g w ith th e

a s s es s m e n t yea r 1 9 9 2 -9 3 .

In addition, deductions are also available in respect of:

1 . R o ya ltie s fro m a n y c o m p a n y in In d ia ( U n d e r S e c tio n 8 0 M )

2 . R o ya ltie s fro m a n y c erta in fo re ig n c o m p a nie s ( U n d e r S e c tio n 8 0 0 )

3 . In te r-c o rp o ra te D ivid en d s (U n d e r S ec tio n 8 0 M )

4 . In c o m e o f C o -o p era tiv e S o c ieties (U n d er S ec tio n S O P )

5 . C a rry fo rw a rd a n d s et -o ff b u s in es s lo s s e s ( U n d e r S e c tio n 7 2 )