Charitable Trust Formation, Registration, Public Donation Governance & Welfare Compliance in India

 From Seed Funding to Public Trust

By CA Surekha Ahuja

“A charitable institution is not built merely by registration papers or donations received.
It is built by public trust, fiduciary discipline, lawful governance, and transparent welfare utilisation.”

Vision & Legal Philosophy of a Charitable Institution

A genuine charitable institution is not merely a legal registration structure. It is a fiduciary public welfare mechanism where:

• founders contribute seed capital,
• trustees administer funds in fiduciary capacity,
• society contributes donations and public trust,
• funds are utilised exclusively for charitable purposes,
• and the institution remains accountable to beneficiaries, donors, regulators, auditors, and law.

The institution must therefore ensure:

Core Principle	Governance Objective	Tax Objective	Public Objective
Public benefit	Fiduciary discipline	Exemption continuity	Welfare delivery
Transparency	Audit trail	Section 11 protection	Donor confidence
No private enrichment	Section 13 safeguards	80G sustainability	Ethical governance
Controlled utilisation	Financial integrity	Compliance continuity	Long-term credibility

Governing Legal Framework

Provision	Subject Matter	Practical Relevance
Section 2(15)	Charitable purpose	Object qualification
Sections 11 & 12	Income exemption	Core exemption framework
Section 12A	Conditions for exemption	Audit/books/return filing
Section 12AB	Registration mechanism	Mandatory registration
Section 13	Violations & denial	Most critical risk provision
Section 80G	Donor deduction approval	Donation ecosystem
Section 115BBC	Anonymous donations	Donor identity control
Section 115BBI	Specified income taxation	Violation taxation
Section 115TD	Accreted income tax	Exit/restructuring risk
Rule 17A	Documentation framework	Filing compliance

Lifecycle of a Charitable Institution

Phase	Objective	Key Compliance
I	Founder seed structuring	Trust deed
II	Legal constitution	Registration
III	Tax activation	12AB & 80G
IV	Donation mobilisation	Donor controls
V	Welfare utilisation	Section 11 application
VI	Audit & reporting	Audit & ITR
VII	Long-term governance	Ongoing compliance

PHASE I — FOUNDERS’ SEED FUNDING & INITIAL STRUCTURING

Seed Money by Founders

The initial contribution by founders generally constitutes:

• initial corpus,
• settlement contribution,
• or institutional seed funding.

This establishes:

• institutional credibility,
• banking capability,
• operational readiness,
• charitable intent.

SOP for Founder Funding

Particulars	SOP Requirement	Documentation	Critical Caution
Mode of contribution	Banking channels only	Bank proof	Avoid cash-heavy funding
Nature of contribution	Corpus/general donation clarity	Founder declaration	Misclassification risky
Accounting treatment	Separate corpus ledger	Corpus register	Incorrect accounting may trigger dispute
Trustee approval	Resolution/minutes	Governance records	Important for transparency
Utilisation controls	Welfare-only use	Internal SOP	No personal usage
Founder KYC	PAN/Aadhaar/address proof	KYC file	Required for audit trail

Founder Funding — High-Risk Areas

Risk Area	Exposure	Consequence
Personal expenses through trust	Section 13 violation	Exemption denial
Cash introduction without explanation	Source scrutiny	Audit issues
Founder-controlled vendors	Related-party exposure	Specified person violation
Unsupported reimbursements	Governance failure	Litigation risk
Excessive founder control	Genuineness challenge	Registration scrutiny

PHASE II — FORMATION & LEGAL CONSTITUTION

Choice of Structure

Structure	Suitable For	Governance Strength
Public Charitable Trust	Welfare/social activities	Strong
Society	Membership NGOs	Moderate
Section 8 Company	Institutional/CSR organisations	Very strong

Trust Deed — Constitutional Backbone

The trust deed is the:

most critical legal and tax document.

Weak drafting is one of the biggest reasons for:

• rejection of 12AB,
• 80G objections,
• Section 13 disputes,
• donor mistrust,
• and governance litigation.

Mandatory Trust Deed Clauses

Clause	Purpose	Tax Relevance	Drafting Caution
Object clause	Charitable qualification	Section 2(15)	Avoid commercial wording
Application clause	Welfare-only utilisation	Section 11	No private diversion
Non-profit clause	Public character	80G	Mandatory
Investment clause	Section 11(5) compliance	Section 13	Critical
Dissolution clause	Asset continuity	115TD mitigation	No return to founders
Trustee restriction clause	Related-party safeguards	Section 13	Arm’s-length basis
Amendment clause	Registration continuity	Future compliance	Restrict arbitrary changes
Irrevocability clause	Institutional stability	Stronger defence	Strongly advisable

Formation Documentation Checklist

Category	Documents Required	Mandatory / Conditional
Trust deed	Executed deed	Mandatory
Settlor KYC	PAN/Aadhaar/address proof	Mandatory
Trustee KYC	PAN/Aadhaar/photos	Mandatory
Witness proof	Identity/address proof	Mandatory in many states
Office proof	Utility bill/rent deed/NOC	Mandatory
Property papers	Title documents	Conditional
Trustee resolutions	Governance records	Strongly advisable

Registration Timeline Matrix

Stage	Authority	Process	Indicative Timeline
Stamp duty & execution	State authority	Deed execution	1–3 days
Trust registration	Sub-Registrar	Registration of deed	2–10 days
PAN allotment	Income-tax Department	PAN application	3–10 days
Bank account opening	Scheduled bank	Institutional KYC	2–7 days
12AB processing	CIT(E)/PCIT	Form 10A/10AB	Up to 6 months
80G approval	Income-tax Department	Linked processing	Parallel/combined

PHASE III — TAX ACTIVATION & REGISTRATION

Registration Forms Framework (FY 2026–27)

Form	Purpose	Applicability
Form 10A	Fresh/provisional registration	New trusts
Form 10AB	Regular registration/renewal/modification	Existing trusts
Form 10B	Audit report	Specified cases
Form 10BB	Audit report	Certain institutions
Form 10	Accumulation under Section 11(2)	Income accumulation
Form 9A	Deemed application option	Income timing mismatch
Form 10BD	Donation statement	80G reporting
Form 10BE	Donor certificate	Donor deduction
ITR-7	Income-tax return	Annual filing

Correct Form Selection Matrix

Situation	Applicable Form	Timeline	Critical Point
New trust/no activities	Form 10A	Immediately after formation	Provisional registration
Activities commenced	Form 10AB	Within prescribed timeline	Activity evidence required
Renewal	Form 10AB	At least 6 months before expiry	Delay may lapse registration
Modification of objects	Form 10AB	Within 30 days	Mandatory trigger

Rule 17A Documentation Matrix

Segment	Documents Required	Common Defect
Constitution	Trust deed/registration certificate	Incomplete scan
PAN records	PAN copy	Name mismatch
Trustee records	PAN/Aadhaar/address proof	Missing KYC
Office proof	Utility bill/NOC	Expired proof
Banking proof	Cancelled cheque/passbook	Wrong account details
Activity note	Welfare activity report	Generic drafting
Financial records	Accounts/bank statements	Unreconciled entries
Governance documents	Resolutions/authorisations	Invalid signatory

Priority Sequence to Avoid Rejection or Delay

Priority	Activity	Practical Purpose
1	Deed vetting	Prevent future objections
2	PAN consistency check	Avoid portal mismatch
3	Trustee KYC verification	Prevent defects
4	Office proof validation	Common rejection area
5	Bank activation	Donation readiness
6	Activity note drafting	Genuineness support
7	Upload verification	Avoid defective filing
8	ARN preservation	Tracking & response
9	Notice monitoring	Timely compliance
10	Compliance calendar	Long-term governance

PHASE IV — PUBLIC DONATIONS & FUND GOVERNANCE

Public Donations — Fiduciary Responsibility

Once public donations commence:

the institution becomes a public accountability entity.

Every rupee received:

• must be traceable,
• properly accounted,
• lawfully utilised,
• and capable of audit verification.

Donation Source Matrix

Source	Permissible	Additional Compliance	Risk Area
Founders	Yes	Related-party disclosure	Section 13 scrutiny
Trustees	Yes	Governance transparency	Benefit monitoring
Public donors	Yes	Receipt & donor records	Anonymous donation risk
Volunteers	Yes	Campaign reconciliation	Cash handling risk
Corporates	Yes	CSR documentation	Utilisation reporting
NGOs	Yes	Grant agreements	Layered funding scrutiny
Foreign donors	Subject to FCRA	FCRA approval mandatory	FEMA/FCRA exposure

Donation Acceptance SOP

Compliance Area	Requirement	Critical Caution
Donation receipts	Serially numbered	Mandatory audit trail
Donor identity	PAN/address/mobile/email	Section 115BBC exposure
Banking channels	Strongly advisable	Avoid informal cash receipts
Corpus donations	Written donor direction	Otherwise general donation
Donation register	Digital + physical	Reconciliation essential
Segregation of funds	Corpus/general/project-wise	Utilisation tracking

High-Risk Donation Areas

Risk Area	Consequence
Anonymous donations	Section 115BBC taxation
Accommodation entries	Registration cancellation exposure
Cash-heavy collections	Source scrutiny
Founder-linked routing	Section 13 investigation
Improper utilisation	Litigation & cancellation risk

PHASE V — UTILISATION OF PUBLIC MONEY

Core Welfare Utilisation Principle

Public money:

must move from donation to documented public benefit.

Every expenditure should:

• align with charitable objects,
• have supporting evidence,
• receive internal approval,
• and withstand audit scrutiny.

Welfare Utilisation Matrix

Welfare Area	Documentation Required	Audit Evidence
Educational aid	Student records	Fee receipts
Medical relief	Medical documents	Bills & beneficiary proof
Food distribution	Beneficiary sheets	Distribution evidence
Skill development	Attendance/program records	Certificates/reports
Women welfare	Beneficiary register	Utilisation records
Rural welfare	Project reports	Field documentation

Fund Utilisation SOP

Area	Mandatory Control	Key Risk
Expense approvals	Resolution/authorisation	Unauthorised spending
Budget monitoring	Budget vs actual review	Excessive admin expenses
Vendor verification	Independent review	Related-party exposure
Banking controls	Dual authorisation preferable	Misappropriation
Supporting vouchers	Mandatory	Audit qualification
Welfare linkage verification	Object mapping	Non-charitable application

Administrative Expense Governance

Expense Type	Position	Professional Caution
Genuine salaries	Permissible	Must be reasonable
Rent & utilities	Permissible	Object linkage required
Welfare travel	Permissible	Evidence required
Founder luxury expenditure	Not permissible	Serious violation
Personal benefits	Prohibited	Section 13 exposure
Excessive trustee remuneration	High-risk	Benchmarking advisable

PHASE VI — STATUTORY COMPLIANCE & REPORTING

Annual Compliance Calendar — FY 2026–27

Compliance	Form	Due Date / Timeline	Practical Note
Registration application	Form 10A	Upon formation	For provisional registration
Regular registration/renewal	Form 10AB	6 months before expiry / within 30 days of object change	Critical timeline
Audit report	Form 10B/10BB	At least 1 month before ITR due date	Mandatory where applicable
Income-tax return	ITR-7	Due date under Section 139(4A)	Timely filing critical
Donation statement	Form 10BD	Generally by 31 May following FY	80G reporting
Donor certificate	Form 10BE	Generally by 31 May following FY	Donor deduction support
Accumulation filing	Form 10	Before ITR due date	Section 11(2)
Deemed application option	Form 9A	Before ITR due date	Timing relief

85% Application Rule — Monitoring Framework

Particulars	Compliance Requirement	Monitoring Strategy
Minimum utilisation	85% application	Quarterly review
Shortfall management	Form 9A/Form 10	Advance planning
Investments	Section 11(5) modes only	Monthly review
Welfare deployment	Object-linked spending	Program mapping

Internal Governance & Public Accountability SOP

Governance Area	Best Practice	Objective
Trustee meetings	Quarterly minutes	Transparency
Internal audit	Quarterly review	Risk mitigation
Donation reconciliation	Monthly	Reporting accuracy
Utilisation verification	Project-wise review	Public trust
Investment review	Monthly	Section 11(5) compliance
Legal review	Annual	Registration continuity

Section 13 — Most Critical Risk Matrix

Violation	Example	Consequence
Benefit to specified persons	Founder enrichment	Exemption denial
Non-11(5) investments	Speculative deployment	Tax exposure
Personal use of trust assets	Private usage	Serious scrutiny
Diversion of donations	Non-object expenditure	Cancellation risk
Excessive related-party transactions	Founder-linked vendors	Section 13 trigger

Top Reasons for Rejection or Cancellation

Default Area	Immediate Exposure	Long-Term Consequence
Weak object clause	Registration objection	Litigation
No activity evidence	Genuineness challenge	Rejection risk
PAN/deed mismatch	Defective filing	Processing delay
Poor donor records	115BBC exposure	Penal taxation
Commercialisation	GPU challenge	Exemption denial
Excessive founder control	Governance concern	Cancellation exposure
Weak accounting system	Audit issues	Credibility loss
Delayed filings	Compliance default	Registration lapse
Non-11(5) investments	Section 13 violation	Tax exposure
Weak utilisation evidence	Public accountability concern	Adverse scrutiny

Ultimate Governance & Compliance Framework

Structural Integrity	Financial Integrity	Governance Integrity	Welfare Integrity
Proper deed drafting	Transparent accounting	Trustee discipline	Genuine public benefit
Section 2(15) alignment	Banking traceability	Resolution-based approvals	Beneficiary documentation
Section 11(5) compliance	Donation reconciliation	Related-party safeguards	Welfare evidence
Dissolution safeguards	Audit readiness	Timely statutory filings	Long-term public trust

Final Professional Conclusion

A charitable institution may begin with:

seed funding by founders,

but thereafter evolves into:

a fiduciary public welfare institution accountable to law, donors, beneficiaries, regulators, auditors, and society.

Its sustainability depends not merely upon registration under Sections 12AB or 80G, but upon:

• disciplined governance,
• lawful fund mobilisation,
• transparent accounting,
• documented charitable utilisation,
• continuous statutory compliance,
• strong internal controls,
• and complete avoidance of private benefit or Section 13 violations.

An institution with:

• proper constitutional drafting,
• compliant registrations,
• transparent donation systems,
• disciplined fund utilisation,
• robust donor accountability,
• timely filings,
• and continuous audit readiness,

is best positioned to:

• sustain tax exemptions,
• attract institutional and public donations,
• withstand regulatory scrutiny,
• preserve public trust,
• and create durable lawful social welfare impact in India.

How to Register in the Startup India Scheme?

Prime Minister Modi announced the Startup India campaign in August 2015. This scheme is part of the action plan towards promoting entrepreneurship in innovation, create jobs and promote investment.

Benefits of the Scheme

a) Patents, trademarks and/or design registration: If you need a patent for your innovation or a trademark for your business, you can easily approach any from the list of facilitators issued by the government. You will need to bear only the statutory fees thus getting an 80% reduction in fees.

b) Tax exemption for startups: Income tax exemption to startups announced for three years

c) Exemption from Capital Gains Tax: Currently, investments by venture capital funds in startups are exempt from this law. Now, the same is being extended to investments made by incubators in startups.

d) Tax exemption on investments above Fair Market Value: In order to obtain tax and IPR related benefits, a Startup shall be required to be certified as an eligible business from the Inter-Ministerial Board of Certification.

What qualifies as a “Startup” under this scheme?

An entity (Private Limited Company or Registered Partnership Firm or Limited Liability Partnership) shall be considered a “Startup” if it satisfies the following conditions:

a)Your business must be incorporated/registered in India for not over 5 years, and

b) Its turnover for any of the financial years has not exceeded Rs. 25 crore, and

c) Innovation is a must– the business must be working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

d) It should have obtained a letter of recommendation for registering under this scheme from one of the following entities:

(i) Recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator established in a post-graduate college in India(http://startupindia.gov.in/startup-recognition.php); or

(ii) Letter of support by any Incubator which is funded (in relation to the project) from Government of India or any State Government as part of any specified scheme to promote innovation;( http://startupindia.gov.in/startup-recognition.php) or

(iii) Recommendation (with regard to innovative nature of business), in a format specified by Department of  Industrial Policy and Promotion, from any Incubator recognized by Government of India;( http://startupindia.gov.in/startup-recognition.php) or

(iv) Letter of funding of not less than 20 percent in equity by any Incubation Fund/ Angel Fund/ Private Equity Fund/ Accelerator/ Angel Network duly registered with Securities and Exchange Board of India that endorses innovative nature of the business. Department of Industrial Policy and Promotion may include any such fund in a negative list for such reasons as it may deem fit (http://startupindia.gov.in/startup-recognition.php); or

(v)  Letter of funding by Government of India or any State Government as part of any specified scheme to promote innovation (http://startupindia.gov.in/startup-recognition.php); or

(vi)  Patent filed and published in the Journal by the India Patent Office in areas affiliated with the nature of business being promoted(http://startupindia.gov.in/startup-recognition.php).

Note:

Solution on above 6 Points - Best thing is just find a good government recognized college incubator or e cell which can provide you recommendation letter or you can join any Incubators in India which are recognized under this scheme.

The entity should not have been formed by splitting up or reconstruction of a business already in existence.

A Proprietorship or a Public Limited Company is not eligible as startup. A One Person Company (OPC), being a Private Limited Company is entitled to be recognized as a 'startup'.

Can an existing entity register itself as a “Startup” on the Startup India Portal and Mobile App?

Yes, an existing entity that meets the criteria can be registered as a startup. Formats of the recommendation/ support letters that need to be attached as part of the application form have been published on the portal and mobile app.

What is the process of registration under the Scheme? 

Step 1:  Log on to http://startupindia.gov.in

Once you have incorporated your business, you can progress on to the next step that entails logging on to the government’s official website (StartupIndia.gov.in) and filling in all the details of your business in the form and uploading the supporting documents and self-certifications whichever are applicable to your business. The entire process is very easy to understand and is completely online. http://startupindia.gov.in/registration.php

The information required in during registration is:

   -Nature of the Entity                 

  - Name of the Entity  

  - Sector

  - Incorporation / Registration No

  - Incorporation / Registration Date

  - PAN

  - Full Address (Office)

  -Authorized Representative Details

  - Director(s) / Partner(s) Details

Step 2:  After completion of step first you can check your application status. 

On successful registration, you would be able to download a system generated verifiable certificate of recognition.

The certificate of recognition is verifiable through the portal and mobile app by entering the Startup Recognition/ Certificate Number.

Step 3:  Real Time Startup Recognition: 

A real time recognition certificate is provided to Startups on completion of the application process. A digital version of the final certificate of recognition is available for download, through the portal and mobile app. A request for certificate of eligibility for tax exemptions from Inter-ministerial Board will be made simultaneously by selection of a simple option.

Approval of Inter-Ministerial Board: – DIPP has also setup an Inter-Ministerial Board to verify the eligibility of Startups opting to avail Tax and IPR related benefits and to provide a certificate of eligibility to innovative Startups.

What are documents startups should consider in their checklist before applying?

1) Certificate of Incorporation

2) Company Registration with the Income-tax-PAN, TAN, VAT, GST

3) If the proposed business of Software Development is only for Exports, then the Company should get itself registered with Software Technology Parks India.

4) If the proposed business is a manufacturing business, then there are other enactments that would be applicable.

5) If the proposed business is a Service oriented business, the applicable laws would be different.

6) Company with 20 employees – Registration with Provident Fund Authorities - Social Security for employees.

7) Company Registration with Local Authority – Shops & Establishments

8) If the company is involved in import and export, it has to do import and export registration.

9) Employees related legal documents.

10) Investor legal documents

However, be careful while uploading the documents. If on subsequent verification, it is found to be obtained that the required document is not uploaded/wrong document uploaded or a forged document has been uploaded then you shall be liable to a fine of 50% of your paid up capital of the startup with a minimum fine of Rs. 25,000

How would the Inter-Ministerial Board review the applications received for the purpose of tax/ IPR benefits?

The Board shall review the supporting document(s) provided to ascertain if the entity qualifies as an eligible business for availing tax/ IPR benefits.

What is the timeframe for obtaining certification of Inter-Ministerial Board for availing tax/ IPR benefits in case an entity already exists?

An application for a certificate from the inter-ministerial board shall be processed within a period of 10-25 working days.

If an incubator rejects an application, can the entity apply again to the same incubator or would it be required to apply at a different incubator?

Yes. In such cases, an entity can apply again to the same incubator that rejected the application, as well as any other incubator.

Is there any specified format for obtaining a recommendation letter?

Yes. The prescribed formats for recommendation/ support/ endorsement letters are published on Startup India portal.

Can entities that do not have any of the other evidences like incubator certificate, funding from registered VCs or patents still apply to Inter -Ministerial Board for tax exemptions?

No. One (i) of the six (vi) prescribed supporting material is mandatory to make an application to the Inter Ministerial Board.

For how long would recognition as a “Startup” be valid?

An entity would cease to be a 'startup' upon expiry of: 

a) 5 years from the date of its incorporation/ registration, OR

b) If its turnover for any of the financial years has exceeded INR 25 crore; OR

Startups would be required to intimate DIPP of any such cases within a period of 21 days.

Funding

One of key challenges faced by many startups has been access to finance. Due to lack of experience, security or existing cash flows, entrepreneurs fail to attract investors. Besides, the high risk nature of startups, as a significant percentage fail to take-off, puts off many investors.

In order to provide funding support, Government has set up a fund with an initial corpus of INR 2,500 crore and a total corpus of INR 10,000 crore over a period 4 years (i.e. INR 2,500 crore per year) . The Fund is in the nature of Fund of Funds, which means that it will not invest directly into Startups, but shall participate in the capital of SEBI registered Venture Funds.

*****

Contributed by:
CA Kulpreet Kaur
Sandeep Ahuja & Co.

Micro, Small and Medium Enterprises Registration, benefits and requirements

The definition of micro, small and medium enterprises as per Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 is as under:

Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:

•          A micro enterprise  is where investment in plant and machinery is less than Rs. 25 lakh

•          A small enterprise  is where the investment in plant and machinery is more than Rs. 25 lakh but less than Rs. 5 crore

•          A medium enterprise is  where the investment in plant and machinery is more than Rs.5 crore but less than Rs.10 crore.

It has made very easy for enterprises that are having MSME Certificate to obtain Licenses, approvals and registrations on any field for their business from the respective authorities as they can produce the Certificate of MSME Registration while making application.

Information required for seeking registration and obtaining certificate of MSME:

•          Personal Information: Name of the applicant, Aadhar Number,Social Category i.e SC/ST etc., Mobile Number, E Mail ID, Address with Pin code

•          Business Information : Name of Enterprise,Type of organization, Address of Operation, Date of Commencement of Business, Main Business Activity with NIC 2 Digit Code, Number of  employees, Investment in Plant & Machinery

•          Other Info: Bank Particulars, Name and Branch Address of Bank, Account Number, Type of Account, IFSC Code

Documentation and registration

-       Aadhar is mandatory of Individual/ owner/ partner/occupier

-       PAN Card

-       Address with Pin code ( Address Proof)

-       E Mail ID and Mobile

-       Statutory Fee Rs.1481/-

-       Registration facility is provided for online and offline

Benefits :

-       Support Available for Technology Upgradation

·         Ministry implements a scheme called Credit Linked Capital Subsidy Scheme (CLCSS) for technology upgradation of Micro and Small enterprises in the country. Under the scheme, 15 per cent capital subsidy, limited to maximum of Rs 15 is provided to the eligible MSEs for upgrading their technology with the well-established and improved technology as approved under the scheme. 48 products and sub-sectors have been approved under the CLCSS till date.

·         The rating fee payable to SMERA and ICRA by the micro and small enterprises is subsidized for the first year only and that is subject to maximum of 75% of the fee or Rs. 40000/-, whichever is less

-       Financing through banks available to MSME at Concessional rates

The banks have been advised by RBI for extension of credit facilities for the MSE sector - working capital limits to such units is computed on the basis of minimum 20% of their estimated turnover up to credit limit of Rs.5crores.

·         A composite loan limit of Rs.1crore ( term loan and working capital)  can be sanctioned by banks to enable the MSME though Single Window

·         Collateral free loans and advances by banks in the case of loans upto Rs 10 lakh extended to units in the MSE sector. Further banks may, on the basis of good track record and financial position of MSE units, increase the limit of dispensation of collateral requirement for loans up to Rs.25 lakh.

·         1 % interest exemption on Overdraft to MSME

·         The Credit Guarantee scheme (CGS) seeks to reassure the lender that, in the event of an MSE unit, which availed collateral- free credit facilities, fails to discharge its liabilities to the lender, the Guarantee Trust would make good the loss incurred by the lender up to 85 % of the outstanding amount in default.

-       Concessions in International Fairs  and ISO Registrations:

·         Financial assistance is provided on reimbursement basis to Govt and Non- Govt organizations associated with MSME for deputation of MSME business delegation to other countries for exploring new areas of MSMEs, participation by Indian MSMEs in international exhibitions, trade fairs, buyer seller meet and for holding international conference and seminars which are in the interest of MSME sectors.

·         Micro & Small Enterprises (MSEs) can get the reimbursement of certification expenses up to 75% of such expenses or Rs.75,000/- ( Whichever lower)  to each unit as one-time reimbursement only to those MSEs which have acquired Quality Management Systems (QMS)/ISO 9001 and /or Environment Management Systems (EMS)/ ISO14001and / or Food Safety Systems (HACCP) Certification.

-       Concession in interest rates and priority for payment :

·         Banks are advised to give interest subsidy of 1% on Overdraft to MSME

·         MSMED ACT 2006 Provides payments priority as under

ü  The buyer is to make payment on or before the date agreed on between him and the supplier in writing or otherwise within 45 days

ü  The agreement between seller and buyer shall not exceed more than 45 days

ü  In case of delay by buyer in making payment of the amount to the supplier, buyer is liable to pay compound interest with monthly rests to the supplier on the amount from the appointed day or, on the date agreed on, at three times of the Bank Rate notified by Reserve Bank.

-       Bar Code Registration Subsidy and Other Subsidies

·         Enterprises that have MSME Registration can avail Bar Code Registration subsidy.

·         Enterprises that have MSME Registration can avail Subsidy on NSIC Performance and Credit ratings

·         Enterprises that have MSME Registration can avail 50% subsidy for patent registration application

-       Government Tendering benefits

·         Issue of tender documents free of cost

·         Waiver of Security deposits

·         Exemption from withholding of earnest money from payments  

·         Enterprises having MSME Registration have preference in procuring govt tenders.

·         Enterprises having MSME Registration can avail price preference by 15% variation for L1 in procuring govt tenders.

-       Other benefits

·         Enterprises having MSME Registration can avail Discount in electricity bill payments by making an application with electricity department

·         Startup Enterprises having MSME Registration can avail Excise Exemption where as term depends on the business activity and nature of business.