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TDS, TCS rates cut by 25% for next year; PF payments reduced from 12% to 10% for three months
Union Finance Minister Nirmala Sitharaman on Wednesday announced a ₹3 lakh crore collateral free loan scheme for businesses, especially micro, small and medium enterprises (MSMEs), as part of a ₹20 lakh crore economic stimulus package to deal with the COVID-19 pandemic.
For salaried workers and taxpayers, some relief was provided in the form of an extended deadline for income tax returns for financial year 2019-20, with the due date now pushed to November 30, 2020. The rates of tax deduction at source (TDS) and tax collection at source (TCS) have been cut by 25% for the next year, while statutory provident fund (PF) payments have been reduced from 12% to 10% for both employers and employees for the next three months.
NBFCs get attention
Apart from MSMEs, other stressed business sectors which got attention were non-banking finance companies (NBFCs), power distribution companies, contractors and the real estate industry.
This is the first tranche of the Atmanirbhar Bharat Abhiyan announced by Prime Minister Narendra Modi on Tuesday as a ₹20 lakh crore economic package. That package includes the ongoing Pradhan Mantri Garib Kalyan Yojana, meant to support the poorest and most vulnerable communities during the pandemic, as well as several measures taken by the Reserve Bank of India to improve liquidity. More tranches are expected in the next few days.
Ms. Sitharaman side-stepped queries on the actual cash outgo for the government, as well as how the Centre intends to raise the needed funds.
Ernst and Young’s chief policy advisor D.K. Srivastava estimated that the measures announced on Wednesday amounted to ₹5.94 lakh crore, which include both liquidity financing measures and credit guarantees, although the direct fiscal cost to the government in the current financial year may only be ₹16,500 crore.
MSMEs will get the bulk of the funding. The ₹3 lakh crore emergency credit line will ensure that 45 lakh units will have access to working capital to resume business activity and safeguard jobs, Ms. Sitharaman said. For two lakh MSMEs which are stressed or considered non-performing assets, the Centre will facilitate provision of ₹20,000 crore as subordinate debt. A ₹50,000 crore equity infusion is also planned, through an MSME fund of funds with a corpus of ₹10,000 crore.
The definition of an MSME is being expanded to allow for higher investment limits and the introduction of turnover-based criteria. In a bid to fulfil the Prime Minister’s vision of a self-reliant or “atmanirbhar” India, global tenders will not be allowed for government procurement up to ₹200 crore.
NBFCs, housing finance companies and microfinance institutions — many of which serve the MSME sector — will be supported through a ₹30,000 crore investment scheme fully guaranteed by the Centre, and an expanded partial credit guarantee scheme worth ₹45,000 crore, of which the first 20% of losses will be borne by the Centre.
Donor has been placed on watch list since December 2019
The money from CDC, a U.S. agency, was to help boost lab capacity for COVID testing.
A decision by the U.S. Centers for Disease Control and Prevention (CDC) to donate $3.6 million to Indian laboratories and research agencies to assist in countering the COVID-19 pandemic could run into delays, given that the agency has been placed on a “watch list” since December 2019, officials said here.
On Tuesday, the U.S. Embassy issued a release saying the CDC would commit $3.6 million as an “initial tranche of funding” to India’s response to the pandemic. “Since early January, the CDC’s India Office has been collaborating with sub-national and national government institutes to support the COVID-19 response in India,” the release said, adding that the money would go towards increasing “laboratory capacity for COVID-19 (SARC-CoV-2) testing, molecular diagnostics and serology”.
However, a government official told The Hindu that any funding from the U.S. government body would have to be cleared by the Ministry of Home Affairs (MHA) as it had been placed on a “watch list” on December 2, 2019, that barred it from sending funds directly to any government or private institute in India without the MHA’s clearance.
Work on Nipah
Significantly, the strictures followed an inquiry into the CDC’s funding of an “unapproved” Indian laboratory in Manipal for work on the Nipah virus, considered a “potential bio-weapon”.
On October 30, 2019, the Union Health Ministry wrote to both the CDC and the Manipal Centre for Virus Research (MCVR), ordering them to shut down the study. In a reply to The Hindu in February, the CDC said, “There was initial confusion about the requirement for the Health Ministry’s Screening Committee clearance for private institutions.”
₹97,100 crore loss in revenue in April: report
The lockdown caused 21 major States to suffer a collective revenue loss of about ₹97,100 crore for the month of April alone, according to estimates from India Ratings and Research (Fitch Group).
“Both Union and State governments are struggling due to the dried-up cash inflow; but, the problems of States are more precarious because the actual battle against the COVID-19 and the associated expenditure being incurred by them,” said India Ratings’ Associate Director Anuradha Basumatari. “Under the current circumstances there is a fair amount of uncertainty regarding the quantum and timings of the State governments’ receivables from the Union government. Moreover, their own sources of revenue have fallen to abysmally low levels,” she said, adding that this situation was pushing the State governments to adopt austerity measures and also explore new revenue generation pathways.
States such as Gujarat, Telangana, Haryana, Karnataka and Tamil Nadu get more than 70% of their revenue from their own sources, and will be the worst impacted. Maharashtra and Kerala also get almost 70% of their revenue on their own.
States’ own revenue mainly comes from seven heads — State Goods and Services Tax (SGST), State VAT, mostly on petroleum products, State excise, mostly on liquor, stamps and registration fees, vehicle tax, tax and duty on electricity, and own non-tax revenue.
Despite the lockdown, nearly 40% of the economy considered “essential” was allowed to remain operational, allowing some revenue to accrue to State governments under these heads, including 40% of SGST, 30% of State VAT, and 10% each of the electricity tax and non-tax revenues, said the India Ratings analysis, based on States’ 2019-20 budgets.
“Things may improve somewhat in May 2020 due to the easing of some restrictions — allowing the liquor sale being the most prominent one,” said the report.
Proposal aims to reduce financial burden on the force and free funds for its modernisation
Call of duty: As per the proposal, civilians will be inducted to serve as both officers and in other ranks.NISSAR AHMADNISSAR AHMAD
In a first of its kind proposal, the Army plans to take civilians on a three-year “Tour of Duty” (ToD) or short service” on a trial basis to serve as officers and in other ranks initially for a limited number of vacancies which will be expanded later.
This is expected to result in significant reduction in the expenditure on pay and pensions and free up funds for the Army’s modernisation.
“The proposal is under consideration. If approved, it will be voluntary and there will be no dilution of criteria in selection,” an Army source said.
The overall purpose of the ToD concept is ‘internship/temporary experience’ and so there will be no requirement of attractive severance packages, resettlement courses, professional encashment training leave, ex-servicemen status, ex-servicemen Contributory Health Scheme for ToD officers and other ranks.
Analysing the cost of training incurred on each personnel compared with the limited employment of the manpower for three years, the proposal calculates that it will indeed have a positive benefit. It states that the cumulative approximate cost of pre-commission training, pay, allowances, gratuity, proposed severance packages, leave encasement and other costs is nearly ₹5.12 crore and ₹6.83 crore on a Short Service Commission (SSC) officer if he or she is released from service after 10 and 14 years, respectively. The overall cost goes up even further as 50-60% of the SSC officers opt for permanent commission and continue in service till the age of 54 and thereafter get pension benefits. “Similar costs for those released after a three-year ToD is just ₹80-85 lakh,” it says.
Similarly, estimates for a jawan with 17 years of service as compared to a ToD recruit with three years’ service shows that the prospective lifetime savings of just one jawan is ₹11.5 crore. “Thus, savings for only 1,000 jawans could be ₹11,000 crore, which could be used for the much-needed modernisation of the Army,” the proposal says.
Highlighting the advantages of this scheme, the sources said this scheme is for those who did not want a full career in the Army but still wanted to put on the uniform.
Individuals who opted for ToD would get a much higher salary than their peers in the corporate sector. They would also have an edge after leaving the service and going to the corporate sector. The Army hoped that this would attract individuals from the best colleges, including the Indian Institutes of Technology.
The proposal states that as per an initial survey, corporates favour individuals aged 26 or 27 who have been trained by the military.
The proposal suggests several incentives such as tax-free income for three years and a lumpsum at the end of three years of about ₹5-6 lakh for officers and ₹2-3 lakh for others.
The Army’s pay and pension bill has been increasingly steeply over the years, accounting for 60% of its budget allocation. In the last five years, though the growth in the defence budget has been 68%, and for defence salaries 75%, defence pensions have increased by a staggering 146%.
The proposal adds that in addition “the nation and the corporates are likely to benefit from trained, disciplined confident, diligent and committed men and women who have completed the ToD.”
Won’t surrender the Kalapani region, he said at an all-party meeting in Kathmandu
K. P. Sharma OliVCG
Nepal’s Prime Minister K. P. Sharma Oli on Wednesday proposed a solution to the ongoing border tension saying that Nepal can allow India to use the link road to the Lipulekh Pass as part of an agreement, but will not surrender the Kalapani territory on which India has been carrying out construction.
Addressing an all-party meeting in Kathmandu, Prime Minister Oli said that he was against India’s unilateral actions in the region but agreed that a solution can be found that will preserve Nepal’s territorial integrity and sovereignty. His observations came on a day when Nepal deployed a contingent of soldiers in the westernmost part of the country near its border with India.
“The government will save the land that was added to Nepal by our ancestors. PM urged the leaders not to make their positions based on things that have come from outside,” Foreign Minister Pradeep Gyawali was quoted as saying in online publication Setopati.
Wednesday’s meetings were attended by a large number of political parties, and also several former Prime Ministers. Mr. Gyawali said that the leaders sought a diplomatic solution to the crisis that involves the territory of Kalapani that India depicts as a part of the easternmost region of the State of Uttarakhand. A similar meeting was also held earlier after India depicted the contested region as its territory in a new set of political maps published in November 2019.
Nepal expressed regret after Defence Minister Rajnath Singh inaugurated the link road that will cut travelling time to the Tibetan plateau and the Kailash Mansarovar. Kathmandu maintains that the territories to the east of Mahakali river are a part of its domain, as agreed in the Treaty of Sugauli of 1816 between the East India Company and the King of Nepal.