The levy is applicable only for large cash withdrawals. The intent is to minimize cash transactions and expand digital payments to enlarge the ambit of organized transactions over time.
In order to tighten the noose on those who don’t file income tax returns (ITR) despite earning taxable income and discourage cash transactions, the Finance Act 2020 introduced higher TDS (Tax Deducted at Source) rates on cash withdrawals for those who do not file ITR. The rates are applicable from 1 July.
Those who haven’t filed ITR for the past three financial years will have to pay TDS at the rate of 2%, if the amount withdrawn from the bank is above ₹20 lakh but doesn’t exceed ₹1 crore in a financial year. If the amount withdrawn exceeds ₹1 crore, TDS will be deducted at the rate of 5% under Section 194N of the Income-tax Act, 1961, for those who do not file ITR.
However, if you withdraw cash above ₹1 crore in a FY, you will still have to pay TDS whether you file ITR or not. In July 2019, the government, through Section 194N, had first introduced TDS at the rate of 2% on cash withdrawals above ₹1 crore in a financial year. This continues to be applicable.
“It is important to note that TDS shall be required to be deducted only when the aggregate amount of cash withdrawal during the FY by an individual from one or more of his bank accounts exceeds ₹20 lakh or ₹1 crore, as the case may be,” said Parizad Sirwalla, partner and head, global mobility services, tax, KPMG in India.
Further, tax will be deducted only on the amount exceeding the said thresholds. “If the individual withdraws a sum of money on regular intervals, the bank or financial institution will have to deduct TDS from the amount once the total sum withdrawn exceeds the threshold in a FY,” said Sirwalla.
For example, if person A has filed his ITR and if he withdraws cash up to ₹1 crore, then no TDS will be applicable. In case person A withdraws cash, which is more than ₹1 crore, then only 2% TDS will be applicable. If person A has withdrawn ₹1.25 crore in two transaction of ₹75 lakh in and ₹50 lakh, the TDS liability will only be on the excess amount that is ₹25 lakh.
On the other hand, if person B has not filed his ITR for the last three financial years and if he withdraws cash between ₹20 lakh and ₹1 crore, then 2% TDS will be applicable. In case person B withdraws cash which is more than ₹1 crore, then 5% TDS will be applicable.
“In case, the individual does not furnish the PAN to the bank or financial institution, then a TDS at a higher rate of 20% will become applicable,” said Sirwalla.
TDS will be applicable on withdrawals from banks, co-operative banks and post offices. The limit will apply on all accounts in the same bank. So, if you have multiple accounts with the same bank, then TDS will be applicable once you breach the mandatory limit across all the accounts or in any one of the account with the same bank. But for accounts with different banks, the limit will apply separately.
Banks will need to keep track of cash withdrawals and once the limit is breached, they will need to deduct TDS.
“Banks are asking declaration from people to ensure they have filed a return in the past three years or in any one of the last three years. This is done by banks for easier tracking as they wouldn’t know if the person has filed ITR or not,” said Sandeep Sehgal, director, taxes and regulatory, AKM Global.
The purpose of slapping this TDS is to minimize cash transactions and push digital payments.
“The levy is applicable only for large cash withdrawals in excess of ₹20 lakh/100 lakh per annum, as the case may be. The intent is to minimize cash transactions and expand digital payments to enlarge the ambit of organized transactions over time. So if individuals need to avoid this TDS levy, they should ensure that their cash withdrawals are restricted to the bare minimum and that the bulk of their payments happen through banking or digital means,” said Divakar Vijayasarathy, founder and managing partner, DVS Advisors LLP.
The ministry further said it has also taken a note of difficulties and concerns expressed by the taxpayers regarding filing of GSTR-3B and other returns.
The 40th GST Council met under the Chairmanship of Union Finance & Corporate Affairs Minister Smt Nirmala Sitharaman through video conferencing here today- 12th June 2020. The meeting was also attended by Union Minister of State for Finance & Corporate Affairs Shri Anurag Thakur besides Finance Ministers of States & UTs and senior officers of the Ministry of Finance& States/ UTs.
GST Council, has recommended to reduce / waive the interest/ late fee for delayed filing of GSTR 3B by small taxpayers (having turnover upto Rs. 5 crores) for the tax period from July 2017 to July 2020, as under:
Reduction in Late Fee for Past Returns (July 2017 to January 2020)
As a measure for trade facilitation and to clean-up the pendency in filing of GSTR 3B for the period from July 2017 to January 2020, the GST Council has recommended to reduce/ waive the late fee for past returns, as under:
a) ‘NIL’ late fee if there is no tax liability;
b) Maximum late fee capped at Rs. 500/- per return if there is any tax liability.
The reduced rate of late fee would apply for all the GSTR-3B returns furnished between 01.07.2020 to 30.09.2020.
Relief for filing of returns for February – April 2020
Further GST Council has recommended to provide relief for small taxpayers (having turnover upto Rs. 5 Crores) by way of reduced interest of 9% in lieu of 18% upto 30 Sept. 2020, for late filing of returns for the tax periods February, March and April 2020. This interest shall be charged beyond specified last date (staggered upto 6th July 2020) for filing of GSTR 3B return for the said tax periods.
Relief for filing of returns for May – July 2020
Also, GST Council has recommended to provide relief for small taxpayers (having turnover upto Rs. 5 Crores) by way of waiver of interest and late fee upto 30 Sept. 2020, for late filing of GSTR 3B return for the tax periods May, June and July 2020.
Recommendations of GST council related to Law & Procedure
The GST Council has made the following recommendations on Law & Procedures changes.
Measures for Trade facilitation:
Reduction in Late Fee for past Returns:
As a measure to clean up pendency in return filing, late fee for non-furnishing FORM GSTR-3B for the tax period from July, 2017 to January, 2020 has been reduced / waived as under: –
i) ‘NIL’ late fee if there is no tax liability;
ii) Maximum late fee capped at 500/- per return if there is any tax liability.
The reduced rate of late fee would apply for all the GSTR-3B returns furnished between 01.07.2020 to 30.09.2020
b) Further relief for small taxpayers for late filing of returns for February, March & April 2020 Tax periods:
For small taxpayers (aggregate turnover upto Rs. 5 crore), for the supplies effected in the month of February, March and April, 2020, the rate of interest for late furnishing of return for the said months beyond specified dates (staggered upto 6th July 2020) is reduced from 18% per annum to 9% per annum till 30.09.2020. In other words, for these months, small taxpayers will not be charged any interest till the notified dates for relief (staggered upto 6th July 2020)and thereafter 9% interest will be charged till 30.09.2020.
c) Relief for small taxpayers for subsequent tax periods (May, June & July 2020):
In wake of COVID-19 pandemic, for taxpayers having aggregate turnover upto Rs. 5 crore, further relief provided by waiver of late fees and interest if the returns in FORM GSTR-3B for the supplies effected in the months of May, June and July, 2020 are furnished by September, 2020 (staggered dates to be notified).
d) One time extension in period for seeking revocation of cancellation of registration:
To facilitate taxpayers who could not get their cancelled GST registrations restored in time, an opportunity is being provided for filing of application for revocation of cancellation of registration up to 30.09.2020, in all cases where registrations have been cancelled till 12.06.2020.
Certain clauses of the Finance Act, 2020 amending CGST Act 2017 and IGST Act, 2017 to be brought into force from 30.06.2020.
Note: The recommendations of the GST Council have been presented in this release in simple language for information of all stakeholders. The same would be given effect through relevant Circulars/ Notifications which alone shall have the force of law.
Council to meet again in July to specially discuss how the government can pay off states for the compensation cess dues, since the funds are falling short.
The amendment, aims at controlling tax evasion, and bring glassiness Form 26AS, which is now being replaced with a new Annual Information Statement (AIS) i.e Form 26AIS.
The Central Board of Direct Taxes (CBDT) on Thursday notified Income Tax (11th Amendment) Rules, 2020.
In exercise of the powers conferred by section 285BB read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-
In Income Tax Rules, 1962 Rule 114-I relating to Annual Information shall be inserted which is, “the Principal Director General of Income Tax (System) or the Director-General of Income Tax (Systems) or any person authorized by him shall, under Section 285BB of the Income-Tax Act, 1961, upload in the registered account of the assessee an annual information statement in Form No. 26AS containing the information specified in the column (2) of the table below, which is in his possession within three months from the end of the month in which the information is received by him.”
The notification consists of a table that contains the nature of information which includes information relating to a tax deduction or collected at source; specified financial transaction; payment of taxes; demand and refund; pending proceedings; and completed proceedings:
Sl. No.
Nature of information
(i)
Information relating to tax deducted or collected at source
(ii)
Information relating to specified financial transaction
(iii)
Information relating to payment of taxes
(iv)
Information relating to demand and refund
(v)
Information relating to pending proceedings
(vi)
Information relating to completed proceedings
(vii)
Any other information in relation to sub-rule (2) of rule 114-I
The amendment, aims at controlling tax evasion, and bring glassiness Form 26AS, which is now being replaced with a new Annual Information Statement (AIS) i.e Form 26AIS.
Further sub-clause (2) of Rule 114-I says, “the Board may also authorize the Principal Director General of Income-tax (System) or the Director-General of Income Tax (Systems) or any person authorized by him to upload the information received from any officer, authority or body performing any function under any law or the information received under an agreement referred to in Section 90 or Section 90A of the Income Tax Act, 1961 or the information received from any other person to the extent as it may deem fit in the interest of the revenue in the annual information statement referred to in sub-clause (1).”
Lastly, sub-clause (3) of Rule 114-I says, “the Principal Director General of Income-tax (System) or the Director-General of Income Tax (Systems) shall specify the procedures, formats, and standards for the purpose of uploading of annual information statement referred to in sub-clause (1).”
At as much as 10% of GDP, the big stimulus package did not appear to leave any major sphere untouched.
Over five consecutive days of interaction with the country’s financial media, FM Nirmala Sitharaman provided the break-up of PM Modi’s Rs 20 lakh crore COVID-19 stimulus for India.
At as much as 10% of GDP, the package did not appear to leave any major sphere untouched as Prime Minister Modi brought out the fiscal artillery to complement RBI’s monetary measures spread over the past few weeks, putting India firmly in the league of biggies that have gone all out against the virus.
In his speech, Mr. Modi said his package would focus on land, labour, liquidity and laws, and would deal with such sectors as cottage industries, MSMEs, the working class, middle class and industry. He also talked of focusing on empowering the poor, labourers and migrant workers, both in the organised and unorganised sectors.
Dubbed Atmanirbhar Bharat Abhiyaan, this Covid relief package puts bold reforms at the heart of Modi’s stated plan to make India self-reliant so that any other crisis that may emerge in future could be efficiently tackled. Below we collate all the details that emerged in five tranches over the past five days.
FIRST TRANCHE
MSME measures
Collateral free automatic loans- a move that’ll enable 45 lakh units to restart work and save jobs. 4 year tenor with 12 months moratorium. 100% credit guarantee on principal and interest – Rs. 3 Lakh Crores (60k Cr cover)
Subordinate debt provision of Rs 20,000 crores for 2 lakh stressed MSMEs. Besides, there will be Rs 50,000 crore equity infusion via Mother fund-Daughter fund for MSMEs that are viable but need handholding. A fund of funds with corpus of Rs 10,000 crore will be set up to help these units expand capacity and help them list on markets if they choose.
Definition of MSMEs revised — the move will allow MSMEs to aim for expansion without losing benefits. Differentiation between manufacturing and service units to be removed.
Small units – Investments upto 10 Cr + Turnover upto 50 Cr
Medium units – Investments upto 20 Cr + Turnover upto 100 Cr
Government tenders upto 200 Crores will no longer be on global tender basis. Global tenders will be disallowed for upto 200 Crores. This will make MSMEs eligible to participate in Government purchases.
Post Covid, e-market linkage to be provided for all MSMEs. Receivables by MSMEs from the Central Government and all PSUs will be cleared in next 45 days
For non-bank lenders
Rs 30,000 crore special liquidity scheme for investing in investment grade debt paper of NBFCs, HFCs and MFIs. These NBFCs are those that are also funding MSMEs. These will be fully guaranteed by government of India.
Rs 45,000 crore partial credit guarantee scheme 2.0 for NBFCs. The first 20% loss will be borne by the guarantor that is government of India.
For Discoms, a one-time emergency liquidity injection of Rs 90,000 crore against all their receivables. The states will guarantee it.
For employees
Liquidity relief of Rs 2,500 crore EPF support to all EPF establishments. The EPF contribution will be paid by the govt for another 3 months (till August). It will benefit more than 72 lakh employees.
Statutory EPF contribution for all organisations and their employees covered by EPFO to be reduced to 10% from 12% earlier (This doesn’t apply to govt organisations). This will help infuse Rs 6,750 cr of liquidity into these organisations.
For Power distribution companies
Power distribution companies will get Rs 90,000 crore liquidity against receivables from state-owned Power Finance Corp. and Rural Electrification Corp. This will allow these discoms to pay dues to power producers.
For Contractors & others
An extension of up to 6 months (without costs to contractor) to be provided by all Central Government Agencies like Railways, Ministry of Road Transport & Highways, Central Public Works Dept.
On real estate, urban development ministry will issue advisory to states/UTs so that the regulators can invoke force majeure. The regulators can suo moto extend completion/registration dates for six months for projects expiring on or after March 25, 2020.
A reduction of 25% of existing rates of Tax Deducted at Source (TDS) & Tax Collection at Sources (TCS) from tomorrow till March 31, 2021. This will release Rs 50,000 crores.
Due date of all Income Tax Return filings extended from July 31 to November 30. Vivaad se Vishwas scheme extended till December 31,2020, without any extra payments.
All pending refunds to charitable trusts and non-corporate taxpayers (but including LLP) will be issued immediately
Date of assessments getting barred as on Sep 30, 2020 extended to December 31, 2020. Date of assessments getting barred as on March 31, 2021 extended to September 30, 2021.
SECOND TRANCHE
Focus on migrant workers, small farmers and the poor, in the manner shown below:
Free food for migrants
For those migrants who don’t have NFSA cards or state cards, 5 Kgs of wheat or rice per person and one kg channa per family per month for next two months to be provided and it will reach through the state governments. This will entail Rs 3,500 crore and is likely to benefit around 8 crore migrants.
One Nation, One Ration Card
National Portability Ration Cards can be used in any ration shops that will be applicable across the country. By August 2020, 67 cr beneficiaries in 23 states or 83% of all PDS beneficiaries will get covered. By March 2021, 100 per cent will be covered.
Rental accomodation
Under PM Awas Yojaana, scheme for rental housing for migrant workers. Under the scheme incentives will be offered to private manufacturing units and industrial units to develop affordable housing, converting govt funded houses into affordable renting accommodations for migrant workers. Shall be done on PPP on concessionaire basis. State government agencies will also be incentivised to develop affordable housing.
MUDRA Shishu loan
Those who have availed loans up to Rs 50,000, an interest subvention of 2% for next 12 months after the moratorium period extended by RBI ends. Three crore people will get benefit of Rs 1500 crore.
Street Vendor
Special scheme for street vendors to avail Rs 5,000 crore loan facility. Will be given Rs 10,000 of working capital.
Affordable Housing
Credit-linked subsidy scheme for middle income households in the income group Rs 6-18 Lakh extended to March 2021. The CLSS scheme was operationalised from May 2017 and extended up to March, 2020. Now, it has been extended till March 2021. This will lead to investments of Rs 70,000 crore in housing and kick-start sectors like steel, cement and create jobs.
For Tribals
Rs 6,000 crore worth of proposals have come from states under CAMPA funds. Tribal people will get employment in forest management, wildlife protection/management and other forest related activities.
For Small/Marginal Farmers
The government is extending Rs 30,000 crore additional capital emergency funds through NABARD for post-harvest Rabi and Kharif related activities for small and marginal farmers.
Under the PM Kisan Credit Card, Rs 2 lakh crore of concessional credit to boost farming activities and it will benefit 2.5 crore farmers. Those in animal husbandry and fisheries will also be included.
THIRD TRANCHE
For framers, and such sectors as food processing and allied activities.
For Upgrading Infrastructure
One lakh crore fund for strengthening the farm gate infrastructure like cold chains, post harvest storage infrastructures etc.
Rs 10,000 crore fund for micro food scheme will be executed with cluster based approach. Will benefit 2 lakh Micro Food Enterprises. For instance, Bihar can have Makhana cluster, Kashmir can have Kesar cluster, Telangana can have Turmeric cluster, Andhra can have chilli cluster.
Govt will launch Pradhan Mantri Matsya Sampada Yojana for development of marine and inland fisheries. Rs 20,000 crore will be spent to fill the gaps in value chains. This will lead to an additional fish production of 70 lakh tons in next five years and provide employment to 55 lakh people.
Rs 13,343 crore for vaccination of livestock in India to eradicate foot and mouth disease.
Rs 15,000 crore will be spent on ramping up the dairy infrastructure. Also, investments will be made in cattle feed.
Rs 4,000 crore for growing of herbal and medicinal plants. Ten lakh hectares of land will be used for growing medicinal and herbal plants and will provide income of nearly Rs 5,000 crore for farmers.
Rs 500 crore have been allocated for beekeeping. This will help 2 lakh beekeepers.
TOP to TOTAL: Rs 500 crore for Operation Greens that will be extended beyond tomatoes, potatoes and onion and will applicable to all vegetables.
Proposes amendment to Essential Commodities Act to enable better price realisation for farmers. Food stuffs including edible oils, oilseeds, pulses, onions and potato will be deregulated. And stock limits will be imposed only under exceptional circumstances like famine and surge in prices.
Agriculture Marketing Reforms
32. A central law will be formulated to provide (a) Adequate choices to sell produce at attractive price, (b) Barrier free inter-state trade, and (c) Framework for e-trading of agriculture produce.
Agriculture Produce Price and Quality Assurance
33. Facilitative legal framework will be created to enable farmers for engaging with processors, aggregators, large retailers, exporters etc. in a fair and transparent manner. Risk mitigation for farmers, assured returns and quality standardisation shall form integral part of the framework.
FOURTH TRANCHE
For Upgrading Infrastructure
Included structural reforms in 8 critical sectors- Coal, Minerals Defence Production, Airspace management, Social Infrastructure Projects, Power distribution companies, Space sectors and Atomic Energy.
Coal Sector
Government is introducing the commercial mining of coal. India needs to reduce import of substitutable cal and increase self-reliance in coal production.
34. The investment of Rs. 50,000 crores is for the evacuation of enhanced CIL’s (Coal India Limited) target of 1 billion tons of coal production by 2023-24 plus coal production from private blocks.
Minerals
35. Enhancing private investment in mineral sector.
36. FMalso explained the rationalisation of stamp duty payable at the time of award of mining leases.
37. 500 mining blocks would be offered through an open and transparent auction process, a joint auction of Bauxite & Coal mineral blocks will be introduced to enhance Aluminum industry’s competitiveness.
Defence Production
38. Indigenization of imported spares, separate budget provisioning for domestic capital procurement.
39. FDI limit in defence manufacturing under automatic route is being raised from 49% to 74%.
40. Corporatisation of Ordnance factory board was also announced.
Civil Aviation (Airspace Management, World Class Airports Through PPP, MRO HUB)
41. Restrictions on the utilisation of Indian Air Space will be eased so that civilian flying becomes more efficient.
42. Government is working hard to make India a global hub for for aircraft maintenance, repair and overhaul.
43. Airports Authority of India has awarded 3 airports out of 6 bid for operation & maintenance on (PPP) basis. Additional investment by private players in 12 airports in first & second rounds expected around Rs 13,000 crores.
Power Sector Reforms
44. Power Distribution Companies in Union Territories to be privatised in line with the new tariff policies. This will enable to strengthen industries and bring in efficiency in the entire power sector. This will also enable stability in the sector, announced the FM.
Boosting Private Sector investment
45. Boosting private sector investment in Social Infrastructure through revamped Viability Gap Funding Scheme of Rs 8,100 crores.
Space Sector
46. Boosting private participation in space sectors. Government is working on a liberal geo-spatial policy. Private sector to be co-traveller in India’s space sector journey through launches, satellite services, commented the Finance Minister.
Atomic Energy
47. The government intends to link India’s robust start-up ecosystem to the nuclear sector – Technology Development cum Incubation Centres will be set up for fostering synergy between research facilities and tech entrepreneurs. Establishment of research reactor in PPP mode for production of medical isotopes.
Fifth Tranche
48. MGNREGS: Additional funding of Rs 40,000 crore to the scheme over and above the Budgetary Estimate.
49. Health: All districts will have infectious disease hospitals while at the block-level, public health labs will be set up.
50. Education: PM eVidya programme to be launched immediately. Each Classroom from 1 to 12 will have one TV channel. Special e-content for visually & hearing impaired. Top 100 universities will be permitted to start online courses by May 30, 2020.
51. IBC reforms: Covid-related debt to be excluded from definition of default under the IBC. No fresh insolvency for next one year. Minimum threshold to initiate insolvency raised to Rs one crore from Rs one lakh earlier.
52. Decriminalising Companies Act: Violations under most of the Companies Act to be decriminalised. This will ease the burden on courts and tribunals. Seven compoundable offences under Companies Act being dropped, 5 offences to be dealt under alternative framework.
53. Listing norms: Companies can now list securities directly in foreign jurisdictions
54. New Public Sector Policy: Public sector enterprise policy: All sectors are open to the private sector while public sector enterprises will play an important role in defined areas. Govt will notify strategic areas and in them at least one PSE will remain but private sector will be allowed. In other sectors, PSEs will be privatised.
55. Additional resources to States: Centre has decided to increase borrowing limit of states from 3% to 5% for FY21. This will give extra resources of Rs 4.28 lakh crore to states. This despite, states having borrowed only 14% of the limit authorised to them. 86% remains unutilised. The additional borrowing limit has been linked with initiating reforms.
The finance minister also gave a break up of how the Rs 20 lakh crore was allocated among the five tranches and the previous schemes as well as the RBI measures.
Atmanirbhar economic package: ITR deadline extended to Nov 30, 2020 for FY 2019-20 and tax audit from September 30, 2020 to 31st October 2020.”
The Central Government has extended the all due dates of all Income Tax Returns for the Financial Year 2019-20 amid COVID-19 outbreak.
Due date of all income-tax return for FY 2019-20 will be extended from 31st July, 2020 & 31st October, 2020 to 30th November, 2020 and Tax audit from 30th September, 2020 to 31st October, 2020.
The Finance Minister Nirmala Sitharaman also said that, All pending refunds to charitable trusts and non-corporate businesses & professions including proprietorship, partnership, LLP, and Co-operatives shall be issued immediately.
The Date of assessments getting barred on 30th September, 2020 extended to 31st December, 2020 and those getting barred on 31st March, 2021 will be extended to 30th September, 2021.
The Period of Vivad se Vishwas Scheme for making payment without an additional amount will be extended to 31st December, 2020.
The package works out to roughly 10 per cent of the GDP, making it among the most substantial in the world.
Key Highlights of the Special economic and comprehensive package of Rs 20 lakh crores Announced by the Govt. of India, for relief and credit support related to businesses, especially MSMEs to support Indian Economy, Atmanirbhar Bharat and to fight against COVID-19.
GOI Presentation on Rs. 20 Lac Crore Special Package: AtmaNirbhar Bharat (COVID-19)
Hon’ble Prime Minister Shri Narendra Modi yesterday announced a Special economic and comprehensive package of Rs 20 lakh crores, equivalent to 10% of India’s GDP. He gave a clarion call for आत्मनिर्भर भारत अभियान or Self-Reliant India Movement. He also outlined five pillars of Aatmanirbhar Bharat– Economy, Infrastructure, System, Vibrant Demography and Demand.
During the press conference here today, Union Minister of Finance & Corporate Affairs Smt. Nirmala Sitharaman said in her opening remarks that Prime Minister Shri Narendra Modi had laid out a comprehensive vision in his address to the Nation yesterday. She further said that after spending considerable time, the Prime Minister has himself ensured that inputs obtained from widespread consultation form a part of economic package in fight against COVID-19.
“Essentially, the goal is to build a self-reliant India that is why the Economic Package is called Aatma Nirbhar Bharat Abhiyaan. Citing the pillars on which we seek to build Aatma Nirbhar Bharat Abhiyaan, Smt. Sitharaman said our focus would be on land, labour, liquidity and law.
The Finance Minister further said that the Government under the leadership of Prime Minister Shri Narendra Modi has been listening and is a responsive Government, hence it is fitting to recall some reforms which have been undertaken since 2014.
“Soon after Budget 2020 came COVID-19 and within hours of the announcement of Lockdown 1.0, Pradhan Mantri Garib Kalyan Yojna (PMGKY) was announced,” Smt. Sitharaman said. She further said that we are going to build on this package.
“Beginning today, for the next few days, I shall be coming here with the entire team of the Ministry of Finance to detail the Prime Minister’s vision for Aatma Nirbhar Bharat laid out by the Prime Minister yesterday,” Smt Sitharaman said.
Smt. Nirmala Sitharaman today announced measures focused on Getting back to work i.e., enabling employees and employers, businesses, especially Micro Small and Medium Enterprises, to get back to production and workers back to gainful employment. Efforts to strengthen Non-Banking Finance Institutions (NBFCs), Housing Finance Companies (HFCs), Micro Finance Sector and Power Sector were also unfolded. Other than this, the tax relief to business, relief from contractual commitments to contractors in public procurement and compliance relief to real estate sector were also covered.
Over the last five years, the Government has actively taken various measures for the industry and MSME. For the Real Estate sector, the Real Estate (Regulation and Development) Act [RERA] was enacted in 2016 to bring in more transparency into the industry. A special fund for affordable and middle income housing was set up last year to help with the stress in this segment. To help MSMEs with the issue of delayed payment by any Government department or PSUs, Samadhaan Portal was launched in 2017. A Fund of Funds for startups was set up under SIDBI to boost entrepreneurship in the country and various other credit guarantee schemes to help flow of credit to the MSMEs.
Key Highlights of the Special economic and comprehensive package of Rs 20 lakh crores Announced by Govt. of India (COVID-19)
a) Rs 3 lakh crore Emergency Working Capital Facility for Businesses, including MSMEs
To provide relief to the business, additional working capital finance of 20% of the outstanding credit as on 29 February 2020, in the form of a Term Loan at a concessional rate of interest will be provided. This will be available to units with upto Rs 25 crore outstanding and turnover of up to Rs 100 crore whose accounts are standard. The units will not have to provide any guarantee or collateral of their own. The amount will be 100% guaranteed by the Government of India providing a total liquidity of Rs. 3.0 lakh crores to more than 45 lakh MSMEs.
b) Rs 20,000 crore Subordinate Debt for Stressed MSMEs
Provision made for Rs. 20,000 cr subordinate debt for two lakh MSMEs which are NPA or are stressed. Government will support them with Rs. 4,000 Cr. to Credit Guarantee Trust for Micro and Small enterprises (CGTMSE). Banks are expected to provide the subordinate-debt to promoters of such MSMEs equal to 15% of his existing stake in the unit subject to a maximum of Rs 75 lakhs.
c) Rs 50,000 crores equity infusion through MSME Fund of Funds
Govt will set up a Fund of Funds with a corpus of Rs 10,000 crore that will provide equity funding support for MSMEs. The Fund of Funds shall be operated through a Mother and a few Daughter funds. It is expected that with leverage of 1:4 at the level of daughter funds, the Fund of Funds will be able to mobilise equity of about Rs 50,000 crores.
d) New definition of MSME
Definition of MSME will be revised by raising the Investment limit. An additional criteria of turnover also being introduced. The distinction between manufacturing and service sector will also be eliminated.
e) Other Measures for MSME
e-market linkage for MSMEs will be promoted to act as a replacement for trade fairs and exhibitions. MSME receivables from Government and CPSEs will be released in 45 days.
f) No Global tenders for Government tenders of up to Rs 200 crores
General Financial Rules (GFR) of the Government will be amended to disallow global tender enquiries in procurement of Goods and Services of value of less than Rs 200 crores.
g) Employees Provident Fund Support for business and organised workers
The scheme introduced as part of PMGKP under which Government of India contributes 12% of salary each on behalf of both employer and employee to EPF will be extended by another 3 months for salary months of June, July and August 2020. Total benefits accrued is about Rs 2500 crores to 72.22 lakh employees.
h) EPF Contribution to be reduced for Employers and Employees for 3 months
Statutory PF contribution of both employer and employee reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months. This will provide liquidity of about Rs.2250 Crore per month.
i) Rs 30,000 crores Special Liquidity Scheme for NBFC/HFC/MFIs
Government will launch Rs 30,000 crore Special Liquidity Scheme, liquidity being provided by RBI. Investment will be made in primary and secondary market transactions in investment grade debt paper of NBFCs, HFCs and MFIs. This will be 100 percent guaranteed by the Government of India.
j) Rs 45,000 crores Partial credit guarantee Scheme 2.0 for Liabilities of NBFCs/MFIs
Existing Partial Credit Guarantee scheme is being revamped and now will be extended to cover the borrowings of lower rated NBFCs, HFCs and other Micro Finance Institutions (MFIs). Government of India will provide 20 percent first loss sovereign guarantee to Public Sector Banks.
k) Rs 90,000 crore Liquidity Injection for DISCOMs
Power Finance Corporation and Rural Electrification Corporation will infuse liquidity in the DISCOMS to the extent of Rs 90000 crores in two equal instalments. This amount will be used by DISCOMS to pay their dues to Transmission and Generation companies. Further, CPSE GENCOs will give a rebate to DISCOMS on the condition that the same is passed on to the final consumers as a relief towards their fixed charges.
l) Relief to Contractors
All central agencies like Railways, Ministry of Road Transport and Highways and CPWD will give extension of up to 6 months for completion of contractual obligations, including in respect of EPC and concession agreements.
m) Relief to Real Estate Projects
State Governments are being advised to invoke the Force Majeure clause under RERA. The registration and completion date for all registered projects will be extended up to 6 months and may be further extended by another 3 months based on the State’s situation. Various statutory compliances under RERA will also be extended concurrently.
n) Tax Relief to Business
The pending income tax refunds to charitable trusts and non-corporate businesses and professions including proprietorship, partnership and LLPs and cooperatives shall be issued immediately.
o) Tax related measures
Reduction in Rates of ‘Tax Deduction at Source’ and ‘Tax Collected at Source” – The TDS rates for all non-salaried payment to residents, and tax collected at source rate will be reduced by 25 percent of the specified rates for the remaining period of FY 20-21.This will provided liquidity to the tune of Rs 50,000 Crore.
The due date of all Income Tax Returns for Assessment Year 2020-21 will be extended to 30 November, 2020. Similarly, tax audit due date will be extended to 31 October 2020.
The date for making payment without additional amount under the “Vivad Se Vishwas” scheme will be extended to 31 December, 2020.
The reduced TDS and TCS rate will be for specific payments such as payment for a contract, professional fees, interest, rent etc.
In order to provide more funds at the disposal of the taxpayers, the rates of Tax Deduction at Source (TDS) for non-salaried specified payments made to residents and rates of Tax Collection at Source (TCS) for the specified receipts has been be reduced by 25% of the existing rates.
The Finance Minister Nirmala Sitharaman said that, Payment for the contract, professional fees, interest, rent, dividend, commission, brokerage, etc. shall be eligible for this reduced rate of Tax Deduction at Source.
This reduction shall be applicable for the remaining part of the FY 2020-21 i.e. from tomorrow 14th May 2020 to 31st March, 2021.
The Finance Minister also said that, It will help to Rs 50,000 crores liquidity through TDS/TCS rate reduction.
She also said that the income tax department has already cleared Rs 18,000 crore worth of refunds where the quantum due was up to Rs 5 lakh and instructed that all pending refunds to charitable trusts and non-corporate business and professions will be issued immediately.
TDS rate was not deducted on salaries, after considering various eligible deductions such as 80C of the salaried person. This had been done to ensure that the salaried individual did not bear the burden of paying higher taxes at the year end.
