**Executive Summary**
This document is an answer to an unstarred question in Lok Sabha regarding the Mutual Credit Guarantee Scheme for MSMEs and simplifications in the new Income Tax Act. The Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) has been launched to provide 60% guarantee coverage by NCGTC. The response also details measures within the Income-tax Act 2025 aimed at reducing compliance burdens for small businesses and individual taxpayers.
**Key Points / Main Content**
* **Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME):**
* Launched to provide 60% guarantee coverage by National Credit Guarantee Trustee Company Limited (NCGTC).
* Applies to credit facilities up to Rs. 100 crore sanctioned to eligible Micro, Small, and Medium Enterprises (MSMEs) for purchasing equipment/machinery.
* Eligibility criteria for borrowers:
* Must be an MSME with a valid Udyam Registration Number.
* Must not be a non-performing asset (NPA) with any lender.
* Minimum cost of equipment/machinery should be 75% of the project cost.
* Implemented by NCGTC.
* MLIs must sanction loans to eligible borrowers and submit loan account details to NCGTC with fees for guarantee confirmation.
* NCGTC has a portal to ensure basic validations and lenders must furnish borrower data. NCGTC verifies this at the time of claim settlement through a maker-checker concept.
* The fund is subject to audit by an independent firm of Statutory Auditors appointed by the Comptroller and Auditor General (CAG) of India.
* **Simplifications in Income Tax Act 2025:**
* Aims to simplify the Income-tax Act, making it more accessible and reducing litigation.
* Includes measures to reduce compliance burden for small businesses and individual taxpayers.
* Specific measures include:
* Provisions for presumptive taxation for businesses under Section 58.
* Provisions for tax audit for businesses under Section 63.
* Provisions for reduction in compliance burden by omission of tax collected at source (TCS) on sale of specified goods under Section 206C.
* Rationalization of Tax Deducted at Source (TDS)/Tax Collected at Source (TCS) rates.
* Extension of timeline for tax benefits to start-ups under Section 140.
* Provisions for allowing certain deductions only on actual payment to micro and small enterprises under Section 140.
**Impact Analysis**
**Stakeholder:** MSMEs
* **Impact:** Gain access to credit facilities with 60% guarantee coverage for purchasing equipment/machinery. Also benefit from reduced compliance burdens through simplifications in the new Income-tax Act 2025.
* **Action Required:** Ensure Udyam Registration is valid. Ensure they are not a non-performing asset. Adhere to the new guidelines within the Income-tax Act 2025.
**Stakeholder:** Member Lending Institutions (MLIs)
* **Impact:** Can extend credit facilities to MSMEs with reduced risk due to the guarantee coverage. Required to use NCGTC portal for validations and data submission.
* **Action Required:** Sanction loans to eligible borrowers, submit required loan account details and fees to NCGTC via the portal, and adhere to validation processes.
**Stakeholder:** Individual Taxpayers and Small Businesses
* **Impact:** Reduced compliance burden, simplified tax processes, and potentially lower tax liabilities due to the changes in the Income-tax Act 2025.
* **Action Required:** Familiarize themselves with the new provisions in the Income-tax Act 2025.
**Stakeholder:** National Credit Guarantee Trustee Company Limited (NCGTC)
* **Impact:** Responsible for implementing the MCGS-MSME scheme, providing guarantee coverage, managing the portal, and processing claims.
* **Action Required:** Ensure the proper implementation of the MCGS-MSME scheme, management of the portal and verification of data.
Key Entities Referenced
Mutual Credit Guarantee Scheme for MSMEs: A scheme to provide guarantee coverage to Member Lending Institutions for credit facilities sanctioned to eligible Micro, Small and Medium Enterprises.
National Credit Guarantee Trustee Company Limited (NCGTC): The entity providing 60% guarantee coverage under the Mutual Credit Guarantee Scheme for MSMEs.
Income-tax Act, 1961: The primary legislation governing income tax in India, subject to ongoing review and modifications.
Income-tax Act, 2025: An updated version of the Income-tax Act, 1961 including simplifications to reduce compliance burdens.
Department of Financial Services, Ministry of Finance: The government entity responsible for implementing the Scheme via NCGTC.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF FINANCIAL SERVICES
LOK SABHA
UNSTARRED QUESTION NO. 2485
ANSWERED ON MONDAY, 15th DECEMBER, 2025/ 24 AGRAHAYANA 1947 (SAKA)
Mutual Credit Guarantee Scheme for MSMEs
2485. SHRI DUSHYANT SINGH
Will the Minister of FINANCE be pleased to state:
(a) the eligibility criteria and implementation framework of the Mutual Credit Guarantee
Scheme for MSMEs along with the manner in which the scheme is expected to enhance
financial inclusion and expand credit access for small businesses;
(b) the safeguards instituted to prevent misuse, fraud or irregular claims under the said scheme;
(c) whether any independent audit or oversight mechanisms have been established by the
Government to ensure transparency and accountability for the said Scheme, if so, the details
thereof; and
(d) the details of the specific simplifications being introduced in the new Income Tax Act to
reduce compliance burdens for small businesses and individual taxpayers and the manner in
which these measures align with the broader objectives of tax reform and ease of doing
business?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) Mutual Credit Guarantee Scheme for MSMEs (MCGS- MSME) has been launched for
providing 60% guarantee coverage by National Credit Guarantee Trustee Company Limited
(NCGTC) to Member Lending Institutions (MLIs) for credit facility upto Rs.100 crore
sanctioned to eligible Micro, Small and Medium Enterprises (MSMEs) under MCGS-MSME
for purchase of equipment / machinery.
The eligibility criteria for borrowers under MCGS-MSME is as below:
i. It should be an MSME with valid Udyam Registration Number;
ii. It should not be a non-performing asset (NPA) with any lender;
iii. Minimum cost of equipment /machinery is 75% of project cost.The Scheme is being implemented by NCGTC, a wholly owned company of Department of
Financial Services, Ministry of Finance, Government of India. The MLI shall sanction loans to
eligible borrowers and then submit details of the loan account on the portal of NCGTC along
with payment of fees, whereupon the MLI shall get a confirmation of loan being guaranteed
under the Scheme.
(b) and (c) A portal has been developed by NCGTC to ensure certain basic validations and the
lenders furnish data in respect of borrowers meeting these validations as also ledger account,
which shall be checked/ verified by NCGTC at the time of claim settlement through maker-
checker concept. Further, the Fund is subject to audit by an independent firm of Statutory
Auditors appointed by the Comptroller and Auditor General (CAG) of India.
(d) A time bound comprehensive review of the Income-tax Act, 1961 was undertaken with
emphasis on making the Act simple, lucid and easy to comprehend, to ensure accessibility to
all taxpayers, reduce litigations, and remove ambiguities. Various measures pertaining to direct
taxes undertaken recently to reduce the compliance burden for smaller businesses and
individual tax payers in the Income-tax Act 1961 are also included in the Income-tax Act 2025.
These measures are as follows:
i. Provisions for presumptive taxation for businesses under Section 58 of the Income-tax
Act, 2025.
ii. Provisions for tax audit for businesses under Section 63 of the Income-tax Act, 2025.
iii. Provisions for reduction in compliance burden by omission of tax collected at source
(TCS) on sale of specified goods under Section 206C of the Income-tax Act, 2025.
iv. Rationalization of Tax Deducted at Source (TDS)/Tax Collected at Source (TCS) rates.
v. Extension of timeline for tax benefits to start-ups under Section 140 of the Income-tax
Act, 2025.
vi. Provisions for allowing certain deductions only on actual payment to micro and small
enterprises under Section 140 of the Income- tax Act, 2025.
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