The Micro, Small, and Medium Enterprises (MSMEs) Development Act, 2006, provides the overall framework to govern MSMEs in India. The Indian government officially recognises the importance of these entities and offers numerous benefits to support their development. Businesses must obtain MSME Udyam registration online through the government's official registration portal.
It is not mandatory for MSMEs to register, but it is beneficial because the registration offers many advantages. Registration is instant and free, paperless, integrated with GST and Income Tax systems for quick and easy verification, and requires the entrepreneur’s Aadhaar and PAN details.
What is UDYAM registration?
You might have stumbled upon this term in your day-to-day dealings, and it might have sparked your curiosity. So, what is UDYAM registration? It is a free online registration that allows businesses (MSMEs) to take advantage of numerous benefits provided by the government. It is an initiative by lawmakers aimed at helping MSMEs grow their businesses and contribute to the nation’s growing economy.
Here are the key features of MSME Udyam registration:
- Brings credibility to the business by officially recognising it as an MSME.
- Provides advantages to MSMEs in procuring government tenders.
- The certificate is permanent and does not require renewal.
- Entrepreneurs do not need to upload any documents, as their furnished information is enough.
- MSMEs receive a permanent Udyam Registration Number (URN), a QR code to verify the business’s details, and an e-certificate.
Any business or individual can register as it covers a wide range of entities, ranging from proprietorships to public limited companies.
Eligible types of entities for MSME Udyam registration
It is evident that these businesses are the backbone of the economy, and their growth translates to more jobs and income for Indian citizens. The government deems all of the following business entities as eligible for registration:
Proprietors/proprietorship firms
Proprietors or proprietorship firms are abundant in India, and MSME registration helps provide credibility to them. The recognition allows them to access a host of benefits that might help them grow from an individual to a bigger organisation.
Limited liability partnerships (LLPs)
LLPs are a popular business structure among Indians as they combine the flexibility and benefits of partnerships and companies. This structure protects a partner’s personal assets against business debts. While annual filings are mandatory, the compliance requirements are much less.
Private limited companies
A private limited company offers the benefits of being a separate legal entity, having perpetual existence, restrictions on sale or transfers of shares, limited liability, etc. They can access many benefits of MSME registration by obtaining the certificate.
Hindu undivided families (HUFs)
These business entities can gain the benefits of being small businesses, along with family businesses. The “Karta” manages the HUF, and this structure recognises the business as a separate entity for tax and legal purposes. MSME registration allows HUFs protection against delayed payments, access to finance, tax incentives, and provides many other benefits.
Partnership firms
Multiple individuals come together and form a partnership by pooling their resources. Two or more individuals operate the business, share profits/losses, and are collectively responsible for their business debts. The partnership agreement defines the ratio of profits/losses and their roles. Partnership firms, like other business structures, enjoy the benefits of MSME registration.
Public limited companies
These companies raise capital by selling shares to the public and must maintain high transparency while adhering to strict regulations. As MSMEs, public limited companies benefit from limited liability and can use access to public markets as a source of funding to support growth while effectively managing regulatory obligations.
Other entities or business structures include trusts, producer companies, co-operatives, manufacturing, trading, and service entities. All these entities can register and enjoy benefits such as government subsidies, collateral-free loans, tax benefits, reduced fees for other government registrations, etc.
Entrepreneurs can log in to the portal and add basic information, such as the name of their entity, type, location, address, annual turnover, bank account details, number of employees, National Industrial Classification (NIC) codes, and investment amount, among other details.
Benefits of MSME Udyam registration
Now you are clear about “what is UDYAM registration”. Let us look at its financial benefits to gain a deeper understanding of why it is beneficial for entrepreneurs to register:
- Collateral-free loans: MSMEs can apply under schemes such as the CGTMSE, subject to lender approval and eligibility.
- Priority in government procurement and lending schemes: Registration allows MSMEs to be considered under priority programmes.
- Patent registration subsidy: Eligible MSMEs may receive up to 50% subsidy under applicable central or state schemes.
- Protection against delayed payments: Buyers delaying payments beyond 45 days are liable to pay interest as per the MSMED Act, 2006.
- State-specific incentives: Some states offer concessions such as reduced electricity tariffs; availability varies by location.
Remember, the benefits depend on scheme conditions and approvals; MSME Udyam registration alone does not guarantee them.
Compliance requirements for Udyam registration
The compliance for MSME registration is practically nil on its own. However, compliance with other regulations is required for MSMEs to take advantage of the benefits.
They must comply with statutory, regulatory, and tax regulations, depending upon their industry, size, type, and operations.
Types of compliance that MSMEs need to be mindful of can be divided into the following:
- Tax compliance (GST/ITR/TDS)
- Statutory compliance (Labour Law/PF/ESI)
- Regulatory compliance (Licenses/Approvals/Clearances)
How does TallyPrime help MSMEs?
TallyPrime provides MSMEs with tools to streamline financial management and compliance. Businesses can track and categorise MSMEs using their Udyam Registration Number, making it easier to monitor operations and eligibility for benefits.
The software helps manage payables and due dates efficiently, allowing users to follow payment timelines such as 15, 30, or 45 days. MSMEs can also access overdue bills, which assists in preparing reports like MSME Form 1 and claiming interest on delayed payments under the MSMED Act, 2006.
Critical financial data is easily accessible with just a few clicks, simplifying record-keeping and helping accountants meet compliance and audit requirements. In addition, TallyPrime supports GST return filing and e-invoicing, reducing manual effort and improving accuracy.
Conclusion
MSMEs are a vital part of India’s economy, and Udyam registration helps businesses access government support, improve credibility, and safeguard their financial interests. While registration is not mandatory, it is highly recommended for entrepreneurs looking to maximise these benefits. Software like TallyPrime can further simplify compliance, manage finances efficiently, and support MSMEs in their growth journey.
