Finance minister Nirmala Sitharaman announced the first two parts of the new economic stimulus package under the government’s “Aatma Nirbhar Bharat Abhiyan” on May 13th and May 14th. The aim is to provide economic relief through these packages and help make India “self-reliant”.
The first tranche included measures for MSMEs, EPFs, discoms, real estate and taxes.
The second tranche included relief measures for migrants, street vendors, labourers and the rural and urban poor
Steps Are Being Taken To Boost Small Businesses
A large portion of the first tranche focused on reviving and providing relief to Micro Small and Medium Enterprises (MSME). The definition of MSMEs itself has been redefined, with increased investment and turnover limits. This encourages small businesses to grow in size and turnover, by assuaging their fear of losing MSME benefits if they outgrow the threshold.
A Collateral-free Automatic loan of Rs 3 lakh crores has been allowed for MSMEs. This will hugely benefit small businesses – an estimate of over 45 lakh units – by allowing them to resume work and save people’s jobs.
Additionally, if the business is under strain, they can avail the Subordinate debt provisions. Rs 20,000 crore of Subordinate debt provisions has been announced for 2 lakh MSMEs.
This along with measures for equity infusions, disallowing of global tenders up to Rs 200 crores, and other interventions, can provide the much-needed lifeline and boost that small businesses need during these economically fraught times.
Measures Will Be Implemented To Ease Tax Payment And Tax Returns
From May 14th, 2020 to March 31st 2021, Tax Deducted at Source (TDS) and Tax Collection at Sources (TCS) will be reduced by 25%. This is estimated to release Rs 50,000 crores in the hands of the people.
A common misconception is that freelancers and self-employed individuals do not have to pay taxes. This is completely untrue. Only freelancers with incomes up to 2.5 lakhs are not taxed. There is 10% tax levied on incomes between 2.5 and 5 lakhs, 20% on 5 to 10 lakhs, and 30% on incomes above 10 lakhs.
The total amount of tax you have to pay based on your income will remain the same. However, with the tax deducted at source being reduced with the new measure, the amount of money you get in your hand on a monthly basis will increase.
The due date for filing all Income Tax Returns has been extended from July 31st, 2020 to November 30th, 2020.
EPF Contribution From Employee’s Salary Has Been Reduced
Both the employer and employee’s contribution to the Employee Provident Fund (EPF) account has been reduced from 12% of the employee’s salary to 10%, till August. This 2% savings will also increase money available in the employee’s hands. This could provide some additional relief to those in financial strain for the next three months.
Liquidity relief of Rs 2,500 crore in EPF support will be given to all EPF establishments. For the next three months, till August, EPF contributions will be paid by the government. This is expected to benefit over 72 lakh employees.
Package Focuses On Helping Those Most In Need
A large portion of the economic package relief measures are dedicated to helping migrants, small traders, street vendors, small businesses, and people from low income communities. These groups and sectors have definitely been the hardest hit,. They require immediate government support the most.
Freelancers, self-employed individuals, and non-corporate businesses tend to be overlooked in most countries, including India, when devising any economic aid plan.
Countries like Germany and the UK had announced relief packages for freelancers who were impacted because of the coronavirus pandemic.
It’s unlikely that there will be any measures announced specifically for these unconventional workers, in the quest to make India self-reliant.
However, don’t panic. The market for freelancers is still very much present, and is likely to continue to be. Self-reliance is something you possessed before the Prime Minister talked of it, anyway. Try to avail of whatever benefits and relief measures are applicable to you, to help you through any financial stress.
Stay informed, and stay safe!
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