Rationalisation of tax provisions for MSMEs

Seeing the growing trend around creation of MSMEs for wealth succession, it is imperative that more clarity is brought about certain provisions of the tax laws in India in relation.

Succession planning is a crucial aspect in everyone’s life. The happenings in the last one year have further enforced upon us the criticality of the same. There are various ways and means through which intergenerational transfer of wealth can be ensured. For movable properties, such as shares of group companies, bank balances, fixed deposit and other financial assets, the next generation may simply be appointed as nominees to ensure that these assets get transmitted to them on demise of the current owners. Further, other movable assets, such as jewellery, artifacts, and other valuables are usually gifted during the lifetime of the individual. However, rather than providing for a piecemeal wealth transition plan, people generally do a Will or, of late, have started settling Family Trusts to ensure seamless transfer of economic interest to the next generation.

A Family Trust may be considered to be a more effective mechanism for ensuring unfettered and seamless succession planning. This is because the Trust is implemented during the lifetime of the patriarch, and therefore, he can ensure that the same is functioning in the manner he would like it to operate and, if required, make amendments to make it more effective and efficient. Further, in case of a Family Trust, the privacy of the document is maintained as the same is not required to be executed through a court process, as it may be in case of a Will.