FM Announces More in-hand Income for Salaried, Collateral-free Loan for MSMEs & Other Relief Measures
Last Updated : May 13, 2020, 7:50 p.m.
A day after Prime Minister Narendra Modi announced a mega INR 20 lakh crore relief package including the measures announced by the Reserve Bank of India (RBI) and centre in the last month or so, the Finance Minister Nirmala Sithraman today revealed the contours of the package. She announced a collateral-free loan for MSMEs, reduction in employees provident fund contributions to ensure people can bring home more and a slew of other stimulus measures. All these measures are a part of the government’s plan to focus on the economy which has taken a hit at the face of the global pandemic i.e. COVID-19. Take a look at the measures in detail.
Salaried Class Gets a Bonanza of More in-hand Income
The statutory provident fund contribution rate is reduced from 12% to 10%. As of now, 12% of your basic salary and dearness allowance used to be deducted from your salary and go down as your contribution to the provident fund. The employer makes a matching contribution of 12% too. For state PSUs, the government will continue to contribute 12% even as the staff contribution is 10%. Now with the finance minister announcing a reduced rate, the salaried class will have more on their hands. People with limited income can also have reasons to rejoice as the government will take up a provident fund for establishments with 100 people and individuals earning less than INR 15,000. Sitharaman further added that the government’s support towards EPF contribution will be extended by another 3 months – June, July, August. The liquidity support amounts to INR 2,500 Cr and will reach to 3.67 lakh establishments and 72 lakh employees.
45,000 Cr Partial Credit Guarantee Scheme for NBFCs, HFCs & MFIs
In what could smoothen the flow of credit to MSMEs and individuals, the government announced a INR 45,000 Cr liquidity support to non-banking finance companies (NBFCs), Housing Finance Companies (HFCs) and Micro-finance Institutions (MFIs). How will it work? Well, the existing partial credit guarantee scheme will be expanded to cover borrowings such as the primary issuance of commercial papers/bonds of these entities. The government will bear the first 20% of the loss. The scheme will allow investments in debt instruments with AA and below rating, as well as instruments with no rating. Not only that, but also a special INR 30,000 Cr liquidity scheme is announced for these firms. As per the scheme, investments will be made in the primary and secondary market transactions in investment-grade debt papers of NBFCs/HFCs/MFIs. The government of India will give a full guarantee to the INR 30,000 Cr scheme.
TDS & TCS Rates Cut by 25%, Date of ITR Filing for FY 2019-20 Extended to November 30, 2020
The government has announced to cut the Tax Deducted at Source (TDS) for all non-salaried payments made to residents and Tax Collected at Source (TCS) of specified receipts by 25%. TDS applies to payments such as rent, commission, brokerage, dividend, interest, etc. The reduced rate will continue till the end of FY 2020-21. Further, the government has extended the last date of filing the Income Tax Return for FY 2019-20 to November 30, 2020. Whereas Vivaad Se Vishwas Scheme has extended till December 31, 2020. The Finance Minister further announced that the date of assessments getting barred as on September 30, 2020, will be extended to December 31, 2020. On the other hand, the date of assessments getting barred as on March 31, 2021, will get extended to September 30, 2021.
A Collateral-free Automatic Loan for MSMEs
The government has announced a collateral-free automatic loan for Micro, Small and Medium Enterprises (MSMEs). As much as INR 3 lakh crore worth of loan to be provided to firms sitting with outstanding loans of INR 25 Cr or their turnover is more than INR 100 Cr. These units can get the loan for a 4-year tenure with a moratorium period of 10 months. Banks and NBFCs financing such loans will get a 100% credit guarantee from the government of India on both principal and interest. MSMEs won’t have to pay any extra fee to get the loan.
MSME Definition Changed to Include More Units
The government has changed the definition of MSMEs to include more units. As a result, a greater number of firms will now be called MSMEs and become the beneficiary of the government’s relief measures. The table below shows what it is now and the change that is proposed by the government. Let’s check out.
Existing MSME Definition (According to the Investment Made in Plant & Machinery)
| Classification of Enterprises | Micro | Small | Medium |
|---|---|---|---|
| Manufacturing | Less Than 25 Lakh | Less Than 5 Crore | Less Than 10 Crore |
| Services | Less Than 10 Lakh | Less Than 2 Crore | Less Than 5 Crore |
Revised MSME Definition (According to Investment & Turnover)
| Classification of Enterprises | Micro | Small | Medium |
|---|---|---|---|
| Manufacturing & services | Investments of Less Than 1 Cr | Investments of Less Than 10 Cr | Investments of Less Than 20 Cr |
| Turnover of Less Than 5 Cr | Turnover of Less Than 50 Cr | Turnover of Less Than 100 Cr |
Real Estate Developers Get a Breather as Government Announces Extension of Project Completion Under RERA
The COVID-19 pandemic has made it impossible for real estate developers to complete projects within the stipulated time frame. Taking note of that, the government has given them a breather by giving an extension of project completion under the Real Estate Regulation Act (RERA) by six months. This will apply to all registered projects expiring on or after March 25, 2020.
Other Relief Measures
- Emergency liquidity injection worth INR 90,000 Crore to discoms seeking cash desperately
- Contractors will get a 6-month extension from all government agencies such as roadways and railways