Grants from Govt Incone Tax

[SIVA Bommareddy]

We are MSME and have recvd a subsidy on interest on term loan recently from our state govt. However the payment recvd can only be recognized if we complete 5 years under MSME category which will end in 2014-2019. If we are out of MSME catergory by virtue of any future investments upto 2019 we should pay back the subsidy recvd.

How should we consider the payment recvd from govt...as income(income tax) or deffered income(mat)...?

[KASTURI SETHI]

At first, you are bound to follow terms and conditions of granting subsidy to you by State Govt.

[SIVA Bommareddy]

Dear Sir,

Thanks for your reply..! Should that mean that the payment recvd from Govt should not be considered as Income till 2019..?

[Ganeshan Kalyani]

since it is income accrued but not realised you can account it as deferred income.

AI Summary

Government subsidy contingency: conditional MSME grant may be treated as deferred income pending fulfilment of eligibility conditions. The subsidy was received subject to a condition that MSME status be maintained for a defined period, failing which repayment is required; because the amount is contingent and accrued but not realised until the condition is satisfied, it may be accounted for as deferred income while complying with the grant's terms and acknowledging the repayment obligation.