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India Financial Stimulus Package

Prime Minister Shri Narendra Modi Announces Financial Stimulus Package of INR 20 Lakh Cores (USD 266 Billion)

Keeping in mind the impact of the COVID-19 outbreak on the Indian economy, our Finance Minister Smt. Nirmala Sitharaman held a press conference on May 13, 2020 to share the details of INR 20 lakh crores (USD 266 billion) stimulus package announced by the Prime Minister Sh. Narendra Modi. The stimulus package dubbed as Atmanirbhar Bharat Abhiyan (self-reliant India Campaign), which is almost 10% of the country’s GDP. The stimulus package is catering to various sections, including land, laborers, micro small & medium enterprises (“MSME”), cottage & handicraft industry, and support to the middle-class community. The Prime Minister has insisted on a Self-Reliant India Movement, and the five pillars that India will stand on to become self-reliant are Economy, Infrastructure, Systems, Demography and Demand.

The Union Finance Minister, Mrs. Nirmala Sitharaman addressed the nation announcing the first part of the package, the key highlights of which are as under:

MSME’s Related Measures:

  • Revision of limit for classification of MSME with the introduction of addition turnover criteria tabulated as under.
    MSME Criteria
    Classification Existing Revised
    Manufacturing Services Manufacturing & Services
    Micro Investment < 25 Lakh Investment < 10 Lakh Investment<Rs. 1 cr. & Turnover < Rs. 5 cr.
    Small Investment < 5 Crore Investment < 2 Crore Investment<Rs. 10 cr. & Turnover < Rs. 50 cr.
    Medium Investment < 10 Crore Investment < 5 Crore Investment<Rs. 20 cr. & Turnover < Rs. 100 cr.
  • Rs 3 Lakh Crore Collateral Free Automatic Loans for businesses, including MSME’s.
  • The subordinate debt of Rs. 20,000 Crore to stressed MSME’s to benefit 2 lakh MSME’s.
  • 4,000 Crore support to Credit Guarantee Fund Trust For Micro & Small Enterprise (“CGTMSE”).
  • Equity Infusion of Rs. 50,000 crore for MSME’s through funds of the fund.
  • E-market facilities for trade fair and exhibition for MSME.
  • Government organization will clear dues of MSMEs in the next 45 days.

Provident Fund (“PF”) Related:

  • Earlier support of EPF provided by the government extended by another three months to salary of June, July and August 2020. (Employer and employee part both will be paid by the government)
  • Reduction in PF contribution rate to 10% for three months in respect of those whom PF will not be paid by the government.

Direct Tax Related:

  • Reduction In Tax Deducted at Source (“TDS”), (in case of non-salaried specified payments to resident)/Tax Collected at Source (“TCS”) rate by 25% from May 14, 2020 to March 31, 2021.
  • All Pending refunds to charitable trusts and non-corporate business & profession (including proprietorship, partnership, LLP and Co-operatives) shall be issued immediately.
  • Due dates of all the income tax return were extended to November 30, 2020 and tax audit extended to October 31, 2020.
  • Date of assessments getting barred on September 30, 2020 were extended to December 31, 2020 and those getting barred on March 31, 2021 were extended to September 30, 2021.
  • Vivad se Vishwas Scheme is extended to December 31, 2020.

Reserve Bank of India (“RBI”) Measures: 

  • The reduction of Cash Reserve Ration (“CRR”) resulted in liquidity enhancement of Rs. 1,37,000 Crores.
  • Raised the way and means advance limits of states by 60% and enhanced the overdraft duration limits.
  • TLTRO of Rs. 50,000 Cr. for investing grade bonds, commercial paper, and non-convertible debentures of NBFC.
  • Targeted long term repo operations of Rs. 1,00,050 for fresh deployment in investment-grade corporate bonds, commercial paper and non-convertible debentures of Nonbank Financial Companies (“NBFC”) and Micro Finance Institutions (“MFI”).
  • Increased bank’s limit for borrowing overnight under the marginal standing facility (MSF), allowing the banking system to avail an additional Rs. 1,37,000 crore of liquidity.
  • Three months moratorium on payment of installments and payment of interest on working capital loans.
  • Special refinance facilities to National Bank for Agriculture & Rural Development (“NABARD”), Small Industries Development Bank of India (“SIDBI”) and National Housing Bank (“NHB”) worth Rs. 50,000 Crores.
  • Special Liquidity Facility of Rs. 50,000 Crore for mutual funds to curb liquidity pressure.
  • Additional time of one year for commencement of commercial operations by Real Estate Sector in case of loans by NBFC’s.

Miscellaneous Measure:

  • To take first step for making India Self Reliant and supporting make in India, all government procurement tenders below Rs 200 Crores shall be confined to domestic manufacturers and MSMEs only.
  • 15000 Crore for emergency health response package.
  • Providing 24 X 7 custom clearance until June 30, 2020.
For more information or questions on the stimulus package, please contact a member of the International Tax Team

U.S. India Corridor

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