Wednesday, May 13, 2020

TDS Reduction | Income Tax Dates | MSME Definition & Loans

The Finance Minister announced relief measures for businesses yesterday as part of the GoI's package for Covid-19 related relief to the economy. Here's summarizing a few relevant measures under Income Taxes, MSME Definitions & Loans, and PF.

A. TDS/TCS Rate Reduction - You may have to pay Higher Advance Tax

1) 25% reduction in existing TDS rates for specified non-salary payments which are made to residents. Payment for transactions like contract, professional fees, interest, rent, dividend, commission, brokerage, will be eligible for reduced TDS rates.

2) TCS rates for specified receipts have also been reduced by 25%.

3) These reduced rates will apply till the end of the financial year i.e. 31st March, 2021.

4) However, also note that if you are someone who would normally not be eligible for income tax refund as your TDS would not necessarily cover your entire tax liability, you are required to pay Advance Tax in four installments during the year, and there is no change in those provisions.

5) No TDS reduction on salary payments, so that will continue as is.

B. Income Tax Due Dates Extended - ITR Filing & Assessments

1) Due date for all Income Tax Returns (ITRs) for FY 2019-20 has been extended from 31st July and 31st October to 30th November 2020.

2) Tax Audit due date has been extended from 30th September to 31st October 2020.

3) Date of Income Tax Assessments getting barred on 30th September has been extended to 31st December. Similarly, assessments getting barred on 31st March 2021 are extended till 30th September 2021.

4) Window for making payments under ‘Vivaad se Vishwas Scheme' without any additional amount has been extended till 31st December 2020.

5) Immediate release of pending Income Tax refunds to charitable trusts and non-corporate businesses like sole proprietorships, LLPs and cooperative societies.

C. MSME Definition Change & Documents for Registration

1) The definitions of Micro, Small & Medium Enterprises have changed to:
Micro: Investment in P&M < Rs. 1 crore AND Turnover < Rs. 5 crore
Small: Investment in P&M < Rs. 10 crore AND Turnover < Rs. 50 crore
Medium: Investment in P&M < Rs. 20 crore AND Turnover < Rs. 100 crore

We would urge any manufacturer or service provider who has not taken an MSME Registration yet to obtain it at the earliest.

2) The documents required for MSME Registration are:
1. Adhaar Card of the Promoter
2. PAN of the Enterprise
3. Incorporation Document such as Partnership Deed, Certificate of Incorporation with Memorandum of Association, etc.
4. Address Proof
5. Bank account details
6. Gross Value of Plant & Machinery invested
7. Last financial year's sales turnover
8. Phone No. & Email ID for Registration
9. No. of Employees

E. Bank Financing Relief for MSMEs - Please Contact Your Bankers Immediately to Know Their Plan of Action on This (Preferably PSU Banks)

1) Emergency Working Capital Facility:
- Additional working capital finance of 20% of the outstanding credit as on 29th February 2020
- Disbursed in the form of a Term Loan at a concessional rate of interest
- Available to units with up to Rs 25 crore outstanding and turnover of up to Rs 100 crore whose accounts are standard (not defaulting in bank payments)
- No additional guarantee or collateral to be provided.

2) Subordinate Debt for Stressed Borrowers or NPAs (Defaulting):
- Banks are expected to provide debt to promoters of stressed and defaulting MSMEs
- Loan amount would be equal to 15% of promoter's existing stake in the unit 
- Maximum loan amount of Rs 75 lakhs only.

F. Provident Fund Relief

1) Government will contribute 12% of salary each on behalf of both employer and employee to EPF for another 3 months - June, July and August 2020.

2) Statutory PF contribution of both employer and employee reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months.

The entire press release can be accessed here. We also recommend waiting for the release of the official Notification effecting such changes to clarify on areas of mixed or unclear interpretations.