TDS, TCS rates cut by 25% for next year; PF payments reduced from 12% to 10% for three months
Union Finance Minister announced a ₹3 lakh crore collateral free loan scheme for businesses, especially micro, small and medium enterprises (MSMEs), as part of a ₹20 lakh crore economic stimulus package to deal with the COVID-19 pandemic.
For salaried workers and taxpayers, some relief was provided in the form of an extended deadline for income tax returns for financial year 2019-20, with the due date now pushed to November 30, 2020.
The rates of tax deduction at source (TDS) and tax collection at source (TCS) have been cut by 25% for the next year, while statutory provident fund (PF) payments have been reduced from 12% to 10% for both employers and employees for the next three months.
NBFCs get attention
Apart from MSMEs, other stressed business sectors which got attention were non-banking finance companies (NBFCs), power distribution companies, contractors and the real estate industry.
This is the first tranche of the Atmanirbhar Bharat Abhiyan announced by Prime Minister Narendra Modi on Tuesday as a ₹20 lakh crore economic package.
That package includes the ongoing Pradhan Mantri Garib Kalyan Yojana, meant to support the poorest and most vulnerable communities during the pandemic, as well as several measures taken by the Reserve Bank of India to improve liquidity.
The ₹3 lakh crore emergency credit line will ensure that 45 lakh units will have access to working capital to resume business activity and safeguard jobs.
For two lakh MSMEs which are stressed or considered non-performing assets, the Centre will facilitate provision of ₹20,000 crore as subordinate debt. A ₹50,000 crore equity infusion is also planned, through an MSME fund of funds with a corpus of ₹10,000 crore.
The definition of an MSME is being expanded to allow for higher investment limits and the introduction of turnover-based criteria.
In a bid to fulfil the Prime Minister’s vision of a self-reliant or “atmanirbhar” India, global tenders will not be allowed for government procurement up to ₹200 crore.
NBFCs, housing finance companies and microfinance institutions — many of which serve the MSME sector — will be supported through a ₹30,000 crore investment scheme fully guaranteed by the Centre, and an expanded partial credit guarantee scheme worth ₹45,000 crore, of which the first 20% of losses will be borne by the Centre.
Power distribution companies, which are facing an unprecedented cash flow crisis, will receive a ₹90,000 crore liquidity injection.
Contractors will get a six month extension from all Central agencies, and also get partial bank guarantees to ease their cash flows.
Registered real estate projects will get a six-month extension, with COVID-19 to be treated as a “force majeure” event.
Employee Provident Fund (EPF) support, provided to low-income organised workers in small units under the PMGKY is being extended for another three months and is expected to provide liquidity relief of ₹2,500 crore.
Mandatory EPF contributions are also being reduced from 12% to 10%.