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Highlights of the mega stimulus package: higher take-home pay, TDS cut by 25%, easier loans for MSMEs

·13-min read

Union Finance Minister Nirmala Sitharaman on Wednesday presented the details of the Rs 20 lakh-crore economic stimulus package, announced by Prime Minister Narendra Modi on Tuesday, to help businesses recover from the debilitating impact of the coronavirus pandemic, to boost growth and to help build a self-reliant (aatma-nirbhar) India.

In the first of the series of press briefings planned to announce how the stimulus package would be disbursed, Finance Minister Sitharaman reiterated that the package was based on five economic pillars — economy, infrastructure, tech-driven systems, demography and demand.

Sitharaman announced tax reforms as part of the first phase of the stimulus package to revive the economy. The government has cut TDS (tax deduction at source) rates by 25 per cent for non-salaried section.

In a bid to provide support to the struggling micro, small and medium enterprises (MSME) sector, the government announced collateral-free automatic loans worth Rs 3 lakh crore.

It also changed the definition of MSMEs by revising upwards the investment limit, and bringing in an additional criteria of turnover size of the company. Further, global tenders for government procurement of up to Rs 200 crore will no longer be allowed.

Following are the highlights of the Wednesday's announcements by the finance minister:

Date of filing Income Tax returns for FY 19-20 extended

  • Direct Tax Measures announced

  • All pending refunds to charitable trusts and non-corporate businesses & professions including proprietorship, partnership, LLP and Co-operatives shall be issued immediately.

  • 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

  • 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.

  • Period of Vivad se Vishwas Scheme for making payment without additional amount will be extended to 31st

EPF relief

  • In order to provide more take home salary for employees and to give relief to employers in payment of Provident Fund, EPF contribution is being reduced for businesses and workers for 3 months, amounting to a liquidity support of Rs 6,750 crores.

  • EPF relief for all establishments with Rs 2,500 crore liquidity support. The Government of India will provide both employer and employee 12% contributions.

  • Extending support for another three months from March-May 2020 to June-August 2020 as well. Nearly 3.6 lakh establishments benefit, 72.22 lakh employees will benefit.

  • This support will be extended by another three months to salary months of June, July and August 2020

  • This will provide liquidity relief of Rs 2500 cr to 3.67 lakh establishments and for 72.22 lakh employees

Rs 50,000 crores liquidity through TDS/TCS rate reduction

  • To provide more funds to 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 shall be reduced by 25% of the existing rates.

  • Payment for contract, professional fees, interest, rent, dividend, commission, brokerage, etc. shall be eligible for this reduced rate of TDS.

  • This reduction shall be applicable for the remaining part of the FY 2020-21 i.e. from tomorrow to 31st March, 2021.

  • This measure will release Liquidity of Rs. 50,000 crore.

Extension of Registration and Completion, COVID-19 as an event of ‘Force Majeure’ under RERA

  • Date of Real Estate Projects under RERA has been extended

  • Ministry of Housing and Urban Affairs will advise States/UTs and their Regulatory Authorities to the following effect:

  • Treat COVID-19 as an event of ‘Force Majeure’ under RERA.

  • Extend the registration and completion date suo-moto by 6 months for all registered projects expiring on or after 25th March, 2020 without individual applications.

  • Regulatory Authorities may extend this for another period of upto 3 months, if needed

  • Issue fresh ‘Project Registration Certificates’ automatically with revised timelines.

  • Extend timelines for various statutory compliances under RERA concurrently.

  • These measures will de-stress real estate developers and ensure completion of projects so that homebuyers are able to get delivery of their booked houses with new timelines.

Relief for real estate sector: Extension of registration and completion date certificates by 6 months

  • Urban development ministry will issue advisory to states/ UTs so that COVID-19 period events can be treated as a force majeure. Extension of registration and completion date certificates may be extended by six months (expiry as of March 25, 2020).

Relief for Contractors: Here’s what the FM said:

  • Extension of up to 6 months (without costs to contractor) to be provided by all Central Agencies (like Railways, Ministry of Road Transport & Highways, Central Public Works Dept, etc)

  • All GoI agencies, such as Railways, highways or central public works, will give three to six months extension to all contractors without extra costs. This will cover construction work and goods and services contracts, completion of works and intermediate milestones, and also concessional period in PPP contracts.

  • To facilitate greater liquidity, government agencies will partially release bank guarantees to the extent of the completed contract so that cash flow improves.

  • Covers construction/ works and goods and services contracts

  • Covers obligations like completion of work, intermediate milestones etc. and extension of Concession period in PPP contracts

  • Government agencies to partially release bank guarantees, to the extent contracts are partially completed, to ease cash flows

Real estate sector

  • The Urban Development Ministry shall issue advisories to states and UTs to treat the COVID-19 period as an ‘Act of God’ and thus allow force majeure.

  • Fresh project registration certificates can be issued and, registration and completion date can be extended suo moto for up to six months for projects registered on or after March 25, 2020.

  • Rs 90,000 cr liquidity injection for DISCOMs

  • DISCOM payables to Power Generation and Transmission Companies is currently Rs 94,000 cr

  • PFC/REC to infuse liquidity of Rs 90,000 cr to DISCOMs against receivables

  • Loans to be given against state guarantees for exclusive purpose of discharging liabilities of Discoms to Gencos

  • Linkage to specific activies/reforms: Digital payments facility by Discoms for consumers, liquidation of outstanding dues of state govts, plan to reduce financial and operations losses

  • Central Public Sector Generation Companies shall give rebate to Discoms which shall be passed on to the final consumers (industries)

Rs 30,000 crore special liquidity scheme for investment in primary and secondary markets

  • NBFCs, HFCs and MFIs: Rs 30,000 crore special liquidity scheme for investment in both primary and secondary markets to buy investment quality debt papers. Fully guaranteed by GoI.

  • NBFCs, HFCs and MFIs: Rs 30,000 crore special liquidity scheme for investment in both primary and secondary markets to buy investment quality debt papers. Fully guaranteed by GoI.

Rs 2,500 crore EPF support for business and workers for 3 more months

  • As businesses continue to face financial stress, the government has extended its payment of EPF contributions

  • Under Prandhan Mantri Garib Kalyan Package, payment of 12% of employer and 12% of employee contributions was made into EPF accounts of eligible establishments

  • This support will be extended by another three months to salary months of June, July and August 2020

  • This will provide liquidity relief of Rs 2500 cr to 3.67 lakh establishments and for 72.22 lakh employees


  • Next step for MSMEs, global tenders in government procurement will be disallowed for up to Rs 200 crore or less. This will allow MSMEs a chance to supply for these big projects. Small units can be part of government purchases and now Self-reliant India can Make in India.

  • Sixth step for MSMEs is that post COVID, since trade fairs and exhibitions will be difficult, we will provide e-market facilities. GoI and CPMEs where there are receivables - all will be cleared within 45 days.

  • Finance Minister Nirmala Sitharaman announced a corpus of Rs 10,000 crore though mother-fund and daughter-fund framework.

  • For MSMEs needing handholding, a Rs 50,000 crore ‘fund of funds’ through ‘mother fund - daughter fund’ framework is being created, to expand their capacity and to get listed on markets which they choose.

Govt to redefine MSMEs

  • The definition of MSMEs is being changed for their advantage so that they can grow in size and get benefits. Investment limit which defined MSMEs have been revised upwards. Additional criteria being brought in is turnover size - earlier differentiation between manufacturing and service MSMEs will be categorised similarly.

  • All receivables of MSMEs will be cleared by govt and PSUs in 45 days.

  • E-Market linkage for SMES since trade fairs and exhibitions may not be held post-Covid. All receivables of MSMEs will be cleared by GoI and PSUs within next 45 days.

  • New definition of MSMEs

  • Low threshold in MSME definition have created fear among MSMEs of graduating out of the benefits and hence killing the urge to grow

The new definition is:

  • Manufacturing and services are now one classification.

  • Micro: Investments less than Rs 1 crore and turnover of less than Rs 5 crore

  • Small: Investment less than Rs 10 crore and turnover less than Rs 50 crore

  • Medium: Investment less than Rs 20 crore and turnover less than Rs 100 crore

The earlier definition was:

  • Manufacturing enterprises:

  • Micro: with investments less than Rs 25 lakh

  • Small: with investments less than Rs 5 crore

  • Medium with investments less than Rs 10 crore

  • Services:

  • Micro with investments less than Rs 10 lakh

  • Small with investments less than Rs 2 crore

  • Medium with investments of less than Rs 5 crore

  • Global tenders to be disallowed upto Rs 200 cr

Indian MSMEs and other companies have often faced unfair competition from foreign companies.

For government procurement, tenders upto Rs 200 crore will no longer be under global tender route. Big benefit to MSMEs, which used to get disqualified, and disallowed from participation.

Rs 3 lakh crore for collateral-free loan for MSMEs

  • Rs 3 lakh crore will be made available for collateral free loan for those MSME units which have Rs 25 crore outstanding loan payments or Rs 100 crore turnover. These loans will be available with a 4-year tenure and a moratorium of 12 months. The move is expected to benefit 45 lakh units.

  • Finance Minister Nirmala Sitharaman will hold daily pressers, starting today, to detail govt’s steps on restructuring economy.

  • Prime Minister has laid out a vision after several discussions at various levels. Inputs obtained were given due consideration. This is to spur growth and built a self-reliant India. This initiative is called Athma Nirbhar Bharat Abhiyan.

  • The financial package announced by Prime Minister Narendra Modi essentially aims to spur growth and build a very self reliant India.

  • To build the ‘Atma Nirbhar India’, India has DBT, Ujjawala Yojana, AWAS Yojana, Swaccha Bharat Abhiyan and Ayushman Bharat. Several schemes which benefitted poor were reform driven.

  • Not to look inwards and be isolationist, but an India that can be confident and contribute to the growth. We have the enterprise to build such capabilities and help the world.

FM Nirmala Sitharaman lists 5 pillars of ‘Atmanirbhar Bharat’

The finance minister lists the five pillars of an ‘Atma-nirbhar Bharat’:

  1. Economy

  2. Infrastructure

  3. Technology driven system

  4. Demography

  5. Demand

What the govt is planning for businesses, MSMEs

  • Businesses/MSMEs have badly been hit due to Covid-19 and they need additional funding to meet operational liabilities built up, buy raw material and restart business.

  • Emergency credit line to businesses/MSMEs from banks and NBFCs up to 20% of entire outstanding credit as on February 29, 2019.

  • Borrowers with up to Rs 25 crore outstanding and Rs 100 crore turnover are eligible

  • Loans to have 4 year tenor with moratorium of 12 months on principal repayment

  • Interest to be capped

  • 100% credit guarantee cover to banks and NBFCs on principal and interest

  • Scheme can be availed till 31 October 2020

  • * No guarantee fee, no fresh collateral

  • 45 lakh units can resume business activity and safeguard jobs

MSME package: Rs 3 lakh crore collateral free loan, for those with Rs 25 crore outstanding loan or Rs 100 crore turnover. Loans with 4-year tenure, moratorium of 12 months. 100% credit guarantee to banks and NBFCs on principal and interest. To benefit 45 lakh units.

  • For MSMEs, collateral free automatic loans worth Rs 3 lakh crore will be provided. This is for 4 year tenure and is 100 percent guaranteed. No principal repayment for 12 months. This will last till October 21, 2020. It will benefit 45 lakh units, allowing them to resume activity and safeguarding jobs

  • The stressed MSMEs need equity support. The government will facilitate provision of Rs 20,000 crore as subordinate debt, which will benefit 2 lakh MSMEs. Functioning MSMEs, which are NPA or are stressed will be eligible. The government will provide support of Rs 4,000 cr to CGTMSE.

  • Finance Minister Sitharaman announces Rs 20,000 crore loan for stressed MSMEs.

  • Loan is for 4 year tenure and is 100 per cent guaranteed. This will last till October 21, 2020. It will benefit 45 lakh units, allowing them to resume activity and safeguarding jobs.

  • FM lists reforms by the Govt so far: Direct Benefit Transfer given the Jan Dhan, Aadhaar, Mobile (JAM), PM Awaaz, Ujjwala, Microfinance schemes, Swachh Bharat, Ayushman Bharat.

  • FM then lists business reforms: public sector bank clean up, recap, FDI liberalisation, Ease of Doing, IBC, GST, and NHAI TOT, power sector reforms, privatisation of airports, cleaning up of coal mining sectors.

  • Rs 52,606 crore transferred to 41 crore Jan Dhan account holders, Rs 18,000 crore grain transfers; Ujjwala, divyang and old age also benefited.

  • FM to announce 15 measures: six for micro, small and medium enterprises, PF, HFCs and MFIs, discoms, contractors, real estate and three tax measures.

  • Rs 18,000 crore of refunds to I-T taxpayers, drawbacks also given, 14 lakh taxpayers benefited.

  • Within hours of the first lockdown, Rs 1.7 lakh crore were issued under PM Garib Kalyan Yojana.

  • Insurance cover of Rs 50 lakh per health worker

  • 80 crore poor given ration

  • Front loaded Rs 2,000 paid to farmers under existing PM Kisan scheme

  • Beginning today for the next few days we will put out the details of PM’s announcement yesterday.

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