Finance Minister Nirmala Sitharaman finally announces the much-awaited financial stimulus package to make India Get – Set – Go.
From announcing loans for business, including micro, small and medium enterprise (MSMEs) to extending the date for filing ITR return, here’s what the Finance Minister has offered to kick-start the Indian economy.
Supporting PM Modi’s’ Atmanirbhar Bharat Abhiyan,’ to encourage growth and to develop a self-reliant India, Nirmala Sitharaman,the Finance Minister has also stressed on the five pillars of growth namely infrastructure, economy, technology-driven systems, demand, and demography. A teaser was given by PM Modi, but the Finance Minister showed the final picture in her speech.
Here are the highlights of the most-awaited stimulus package that India was looking forward:
Union Finance Minister Nirmala Sitharaman unveiled the details of the economic package worth Rs 20 lakh crore.
Announcing a special package for Micro, Small, and Medium Enterprises (MSMEs), Sitharaman announced that the Government would provide stressed MSMEs with equity support and facilitate the provision of Rs. 20,000 Crores as subordinate debt.
PM Modi pitched for a self-reliant India in the post-COVID-19 world as he announced an economic package that is about 10 percent of GDP of the country. The Prime Minister further said that the package would help every sector of the economy, including farmers, workers, middle-class people, industrial units, and the MSME sector.
The Key Highlights of the economic package:
Transfer of Money and Grains
- To date, Rs 52,606 crore has been transferred to 41 crore Jan Dhan account holders, and Rs 18,000 crore grain transfers to needy and vulnerable; Ujjwala, divyang and old age masses have also benefited
- Beginning from May 13, 2000, over the next few days, the FM’s team will put forth the PM’s vision of self-reliant India and observe their responsibility towards the needy, poor, divyang, the migrant workers, and the aged of the country.
Loan to MSME:
- A collateral-free MSME loan will be provided. This will give a facility of 3 lakh crore. These loans will have a 4-year tenure and will be valid up to October 31, 2020.
- To help the MSMEs, the government announced a Rs 20,000 crores subordinate debt for stressed MSMEs. Around two lakh MSME’s will benefit from it.
- The government will provide support of 4,000 cr to CGTMSE. The definition of MSMEs has been changed. The micro-units can now have an Rs. 5 crore turnovers. There will be no global tender for up to Rs. 200 crores. Also, the payment which is pending to MSMEs will be made in 45 days.
- The stressed-out MSMEs will have a bailout of up to Rs 20,000 crore liquidity for around 2 lac units. Also, Rs. 50,000 crore equity will be infused into MSMEs. This will give a significant boost to MSMEs.
- There will be a 12-month moratorium on MSME loans. A 100% credit guarantee cover will be given to them. Approximately 45 Lac MSMEs will benefit from the loans. Loans will be given to them till October 31.
- Global tenders are to be banned up to Rs 200 crores in any of the government ventures. Foreign companies are a massive competition for the Indian MSMEs, and they often use unfair practices to procure projects in India. Indian MSMEs fall prey to such international companies. This prohibition will make a self-reliant India and, in turn, will also be able to serve ‘Make in India’ initiative come true.
New Definition Of MSMEs
EPF Support for Business and Workers
- To ease off the financial stress as businesses will get back to work, the government will continue to provide EPF support towards the workers as well as business for around three more months, by providing Rs. 2,500 crores of liquidity relief.
- Provident fund contribution of the employers and workers is reduced from 12% to 10% each of the wages for the next three months. The EPFO benefit will lead to more take-home salary for them, thereby increasing their purchasing power.
‘Special Liquidity Scheme’
A ‘Special Liquidity Scheme’ will be launched by the government. 30,000 crores will be injected for the launch. Under this scheme, the investments will be made in graded debt paper for the primary as well as the secondary market for transactions in investments of HCFCs, MFIs, and NBFCs.The securities under the scheme will be fully guaranteed by the central government. Furthermore, the government has also announced a 45,000 crore partial credit guarantee scheme for NBFCs.
Distribution Companies in India are facing the unusual problem of cash flow during recent times. They are facing a severe crisis in all the states. The Revenues have plummeted, and the DISCOMs are facing an exceptional liquidity crunch. To help them, a liquidity infusion of Rs 90,000 crore will be provided.
Relief to the Contractors
To provide relief to the contractor, an extension of up to 6 months is given to them by all the central agencies like Railway, Ministry of Road Transport and Highway, Central Public Work Department, and so on. This will cover goods and services contracts along with the completion of work and intermediate milestones. It will also give a concessional time in PPP contracts.
Extension in Filing Income Tax Returns
- To provide more funds at the disposal of the taxpayers, the rates of Tax Deduction at Source (TDS) for non-salaried specified payments which are made to residents and rates of Tax Collection at Source (TCS) for the specified receipts shall be decreased by 25 percent of the current rates.
- The Due date has been extended from July 31, 2020, and October 31, 2020 for all income tax returns to November 30, 2020, for the financial year 2019-20. Similarly,Tax audit dates are extended from September 30, 2020, to October 31, 2020, respectively.
- ‘Vivad se Vishwas’ is a Direct Tax Scheme.It settles any tax disputes between the income tax department and the individuals. The government has extended the deadline for this scheme for the individuals, to enable payments without any additional amount up till December 31, 2020. This extension of deadline has come as a relief to those individuals who want to settle their tax disputes
- Payment for the professional fees, contract, interest, rent, commission, brokerage, dividend, etc. shall be eligible for the reduced rate of TDS
- Also, this reduction shall be applicable for the remaining part of the financial year 2020-21 with effect from tomorrow to March 31, 2021.
In a relief for the real estate sector, advice has been given to the States and UTs and their regulatory authorities to prolong the registration and completion date by six months for all of their registered projects, which may be expiring on or after March 25, 2020, without any individual applications.
MSME sector – glorified
The budget which has been announced is a reflection of the words of concern by the Union Minister Gadkari, who said that the MSME sector in the country is in a dire state. He requested the major industries to ease out the outstanding dues to such companies within a month.
The finance minister’s announcements have been welcomed as a path-breaking reform for the stressed MSME sector. It has been anticipated that the infusion of the promised funds will undoubtedly accelerate the growth of the MSME sector.
Also, the e-market linkage for MSMEs will provide an excellent platform as against their non-participation in trade fairs and exhibitions due to COVID-19.
The most important announcement has been in redefining the MSME, which had not changed since the MSME Development Act of 2006. This had been long-awaited and is a big step towards its growth. This newly defined MSME sector will surely emerge as the most vibrant and dynamic sector, which will contribute towards self-reliant India in a big way.
The MSME sector is often considered as the backbone of our country. It contributes a good 30% share in the GDP and manufacturing input of 45%.
However, the benefits of these announcements are yet to show on the ground level. So let’s hope for the best.
With a wish to open up new vistas for a vibrant and dynamic economy with the aid of the new technology, this vibrant India shall become a responsible society that will attend to its vulnerable, old, and weak among its people.
Looking forward to a more caring and charismatic India!