Nirmala Sitharaman announces TDS rate cut; ITR filing deadline extended

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Twenty five percent reduction in TDS, extension of due date for filing income tax returns to November, reduction of employers, employees’ contribution to EPF by 10%, six measures to revive the ailing MSME sector are some of the salient features of the economic package unveiled by Finance Minister Nirmala Sitharaman on Wednesday, May 13.

The package, which is themed around the 'Self-reliant India campaign', will focus on land, labour, liquidity, and laws to revive the economy that has come to a standstill due to the six-week coronavirus lockdown.

FM Sitharaman said the announcements will be made in tranches. Today's tranche included MSMEs, EPF, NBFCs and MFIs, discoms, contractors, real estate sector and 3 tax measures. Under the MSME package, the minister offered collateral free automatic loan for MSMEs of up to Rs 3 lakh crore for 4 year tenure to help them resume business and safeguard jobs. Rs 20,000 crore will be infused through subordinate debt for stressed MSMEs who have equity problems.

For expansion of capacity of MSMEs, the FM proposed equity funding for MSMEs with growth potetial through a fund of funds with a corpus of Rs 50,000 crore. In the third scheme for the MSME sector, the finance minister said that a fund of funds will be set up for the MSMEs that are viable. The fund of funds will have a corpus of Rs 10,000 crore. The scheme will help the MSME increase its size.

Giving a booster shot for MSME sector, FM also revised their definition and increased their investment limits. "There has been a long-pending demand for the revision" she said adding that the distinction between manufacturing and service sector MSMEs will be eliminated and an additional criteria of turnover is also being introduced for MSMEs.

Under the new definition, businesses with investment up to Rs 10 crore, and turnover up to Rs 50 crore to be classified as small business. Similarly, businesses with investment up to Rs 20 crore, and turnover up to Rs 100 crore to be classified as medium business.

Besides, Sitharaman also proposed dis-allowance of global tenders for government procurement for up to Rs 200 crore. This will make MSMEs do their business with a lot of confidence and will also boost the Make In India program, she said.

As regards TDS tax reduction, the government will reduce the amount of tax to be deducted or collected at source by individuals and businesses at the time of transactions to put more money in their hands, finance minister Nirmala Sitharaman announced on Wednesday.

This reduced rate of TDS (Tax deducted at source) and TCS (Tax collected at source) will be available for payment for contract, professional fees, interest, rent, dividend, commission and brokerage income.

This reduction will come into force from tomorrow and shall be applicable for the remaining part of the financial year 2020-21.

The provident fund deduction for government and public sector employees will continue at 12 percent.

The government also extended the due date of all income tax returns for FY 2019-20 from 31 July 2020 and 31 October 2020 to 30 November 2020. The due date of tax audits from 30 September 2020 has been pushed to 31 October 2020.

Sitharaman also announced that the tax department was being told to immediately issue all pending refunds to charitable trusts and non-corporate businesses professions including proprietorship, partnership, LLP and cooperatives.

Nirmala Sitharaman also announced the statutory provident fund or PF contribution of both employer and employee will be reduced to 10% each from existing 12% each for all establishments covered by EPFO for the next three months.

This is to provide more take-home salary for employees and to give relief to employers in payment of PF dues. The Central Public Sector Enterprises (CPSEs) and state public sector undertakings (PSUs) will, however, continue to contribute 12% as an employer contribution.

This scheme will be applicable for workers who are not eligible for 24% EPF support under PM Garib Kalyan package and its extension, she said.

The finance minister has sought to give a boost to the real estate sector by announcing suo moto relief of 6 months for the RERA completion timelines for all projects in all states with an additional window of 3 months that can be granted by the individual state authorities.

The package is the first tranche of the Rs 20 trillion financial package promised by Prime Minister Narendra Modi in his address to the nation on Tuesday (with inputs from agencies)

Image Credit: Indian Express

 

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