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Atmanirbhar Bharat Package – Measures Related To Personal Finance

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Finance Minister Nirmala Sitharaman on 17th May 2020 completed the fifth and final tranche of announcements under the Atmanirbhar Bharat Package. The Narendra Modi led government allocated approximately Rs. 20 lakh crores for this scheme to help soften the blow of economic losses due to Coronavirus.

On the 13th Maya, 2020, FM Nirmala Sitharaman announced several measures related to direct taxation:

1. Tax Deducted at Source (TDS) and Tax Collection at Source (TCS)

The government has moved to reduce the rate of tax deducted at source (TDS) and tax collection at source (TCS) by 25% with effect from May 14, 2020, for the current financial year. 

This move is set to benefit investors and working professionals. However, the reduction in TDS and TCS does not bring down the tax liability of taxpayers. Individuals will be required to pay their total tax liability at the time of tax filing. 

TDS has been cut by 25% on 23 items like dividend payments, interest on deposits, bank accounts, etc. The TDS and TCS reduction are not applicable for taxpayers who do not furnish their PAN Card. This is for non-salaried transactions only. TDS on salary has not been reduced. 

For example, in case you were to receive any income from your investments, and these investments are applicable to 10% TDS, with this move TDS would be reduced by 25% to 7.5%.

2. Fast-tracking of tax refund 

The government has announced that all pending refunds of charitable institutions, non-corporates, businesses, partnerships, and sole proprietorship shall be issued immediately to help organizations with their working capital requirements.

3. Extension for Income Tax Filing and Vivaad Se Vishwas Scheme

The government has provided an extension for filing Income-tax returns (ITR) for FY 2019-20. The last date for filing ITR has been extended to November 30, 2020, from July 31, 2020. 

Along with the extension of the ITR filing date, the government has also extended the last date for Vivaad Se Vishwas Scheme to December 31, 2020. The earlier deadline for the Vivaad Se Vishwas scheme was June 30, 2020.

4. Liquidity Relief for EPF establishments

The government in the month of March had provided liquidity relief for all EPF establishments with 100 employees and less than Rs. 15,000 take-home salary. The liquidity relief was provided by supporting the EPF contributions for both the employee and employer for such establishments until May 2020. This relief has been extended for another three months. 

5. Statutory PF Contribution

The statutory PF contribution for those who are not covered in the earlier measure (liquidity relief), both the employer and employee contribution, is being reduced to 10% from 12%. 

However, for Central Public Sector Enterprises (CPSE) and State Public Sector Undertakings (PSU), the government has announced that they will continue to pay 12% from the employer side however employees will be given the advantage of contributing 10%. This will increase the take-home salary.

This announcement will allow private-sector employees to contribute 10% towards their EPF corpus. Earlier, employees were mandated to contribute 12% towards EPF. This will lead to an increase in take-salary for employees.

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