The announcements, described by Sitharaman as the first of a series of tranches to be unveiled over the next few days, is a part of Rs 20 lakh crore fiscal and monetary package announced by PM Modi on Tuesday to support the economy.
- News18.com New Delhi
- Last Updated: May 13, 2020, 9:27 PM IST
Finance minister Nirmala Sitharaman on Wednesday announced the first instalment of a mega relief package aimed at reviving the economy with 15 measures and extended guaranteed credit for small and medium businesses, non-financial banking companies and power distribution companies (discoms).
The announcements, described by Sitharaman as the first of a series of tranches to be unveiled over the next few days, is a part of Rs 20 lakh crore fiscal and monetary package announced by Prime Minister Narendra Modi on Tuesday to support the economy, which has been devastated by a weeks-long lockdown to curb the spread of coronavirus.
Sitharaman said the government will provide Rs 3 lakh crore worth of collateral free- automatic loans for businesses, including SMEs, a move that will help 45 lakh businesses. She also said the government will provide Rs 90,000 crore for power distribution companies via state-run power finance companies.
Rs 30,000 crore special liquidity scheme has also been introduced for NBFCs under which investments will be made in both primary and secondary market transactions in investment-grade debt papers of these institutions. These securities will be fully guaranteed by the government.
Sitharaman said the next wave of reforms with self-reliance as the guiding principle will focus on land, labour, liquidity and laws. “Essentially, this is to spur growth and to build a self-reliant India. That is why this initiative is called ‘Atmanirbhar Bharat Abhiyan’,” she said.
The finance Minister’s announcements also aimed to improving the sagging morale of India’s workforce, facing the brunt of a slowing economy and muted corporate earnings, by increasing take home pay temporarily by cutting EPF contribution from 12 to 10 per cent for the next three months. The due date for income tax returns for 2019-20 has also been pushed back.
Here are the details of what the package has for different sectors:
Relief for MSMEs
The finance minister announced Rs 3 lakh crore collateral free automatic loan for businesses, including MSMEs. The loan will have a four year tenure and will offer a 12-month moratorium on interest payments.
Sitharaman said Rs 20,000 crore subordinate debt will be provided for stressed MSMEs, which would benefit two lakh businesses. A Rs 50,000 crore fund of funds for MSME is being created, which will infuse equity in MSMEs with growth potentials.
The definition of MSMEs has been changed to allow units with investment up to Rs 1 crore to be called micro units instead of Rs 25 lakh at present. Similarly, units with a turnover up to Rs 5 crore will now be categorised as micro units, with a turnover based criteria being introduced to define small businesses. To help MSMEs compete in government tenders, global tenders will be banned for government procurement up to Rs 200 crore.
Rs 30,000 crore support for NBFCs, HFCs, MFIs
The finance minister announced a Rs 30,000 crore special liquidity scheme for non-banking financial institutions (NBFCs). A Rs 45,000 crore partial credit guarantee scheme 2.0 was also unveiled for NBFCs, housing finance companies (HFCs), and microfinance institutions (MFIs) with low credit rating to help them extend loans to individuals and MSMEs.
25% cut in TDS/TCS rate
The government slashed the tax deducted at source (TDS) and tax collected at source (TCS) rates for non-salary payments to residents by 25 per cent. However, Sitharaman clarified that the same “shall also apply to all payments for contracts, interest, rent, dividend, commission or brokerage.” The reduction, she said, would put nearly Rs 50,000 crore into the hands of people who would have otherwise paid it as TDS.
Deadline to file ITRs extended
In a relief to taxpayers, the government extended the deadline for filing of all income tax returns for FY20 till November 30. The direct tax dispute resolution — Vivad Se Vishwas scheme – too has been extended by six months till December 31.
Sitharaman said the Income Tax Department will fast-track processing of pending refunds to charitable trusts, limited liability partnerships (LLPs), non-corporate businesses, proprietorship firms, among others.
The government announced a Rs 90,000 crore liquidity infusion in electricity distribution companies to help them overcome the current financial stress. This amount will help in clearing the outstanding dues of discoms by state owned financial institutions. State-owned Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) will infuse the liquidity by raising the ₹90,000 crore from the market against the receivables of discoms. The state governments will provide a guarantee.
The finance minister extended by three months the government support to companies with less than 100 employees to meet retirement fund obligations. For all companies, the statutory obligation to pay 12 percent of basic salary as employer’s share to employee provident fund (EPF) contribution has been reduced to 10 percent to boost their liquidity.
Sops for contractors
In a relief to contractors impacted by the COVID-19 pandemic, they will now receive up to six months extension for completion of obligations under highways, railways and other contracts. “The extension of up to six months without cost to contractor is to be provided by all central agencies like Railways, Ministry of Road Transport & Highways and Central Public Works Department,” Sitharaman said.