In the recent months, the government and RBI have come out with a bunch of relief measures for individuals and businesses to alleviate the financial and economic effects due to the spread of Covid-19. The relief measures include payments and time period extensions, relaxations and reduction in tax compliances amongst others.Let’s have a look at some of them,what the government have announced and their effects on our personal finances:
1. Relaxation on Income Tax Return Filing Compliances: Giving a major relief to the taxpayers of the country, the government has extended the due date of filing of Income Tax Return to 30 November, 2020. Postponing the income tax return filing deadline, should offer certain tax payers, opportunities to preserve their cash flow and provide additional time to organise their tax and financial affairs and meet the compliance obligations in this difficult period.
2. Loan Moratorium Extension: To ease out the loan repayment obligation, RBI has increased the moratorium period of all loans EMIs and credit card dues till August, 2020. Those people who are not able to clear their debts due to the pandemic can opt for this repayment deferment. However, it is also important to keep in mind that the interest component on their loan will continue to accrue on the outstanding dues, and further leading to increased EMIs or additional instalments at the end of their loan tenure. Hence, it is advisable to wisely choose the option whether to avail the option or not.
3. Reduction in TDS & TCS Rate: The CBDT had ordered a concession of 25% reduction in the rate of Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) from payments made between 14 May,2020 to 31 March, 2021 in respect of specified payments for non-salaried taxpayers. It means that if a specified payment is made, then the rate of TDS/TCS shall be reduced by 25% from the actual rate of taxes leading to more income in the hands of the taxpayer. This amendment is done to increase the liquidity in the hands of the taxpayer. Whereas on the other hand, it also leads to deferment of tax liability for the future as there would be a little more income in hand.
4. Wage Benefits in the form of EPF Contribution: The government have announced a statutory rate of EPF contribution of both employer and employee to 10% of basic wages and dearness allowance from existing rate of 12% for all class of establishments covered under the EPF & MP Act, 1952 for a period of 3 months i.e. May-July 2020. This reduction shall have a higher take-home pay due to reduction from his pay and employer shall have his liability reduced by 2%. Hence, taxpayers shall keep in mind that such reduction shall lead to additional income in their hands which will be taxed as per the applicable income tax slab rates in the future.
Also, the government has extended the existing provision to pay 24% of monthly wages into PF accounts for the next three months i.e. June, July and August, 2020 for employees, who are employed in establishments that employ less than 100 employees, with atleast 90% or more of the workforce earning less than Rs.15,000 a month.The earlier EPF Relief measure was ended in the month of May 2020.
5. Investment in Pradhan Mantri Vaya Vandana Yojana (PMVVY) date extension: The PMVVY scheme was introduced by the government exclusively for the senior citizens aged 60 years or more to provide a guaranteed pension payouts for 10 years with an assured return of 7.40%, where the maximum amount allowed for investment is Rs.15 lakh. The last date for investing in such scheme was 31 March,2020 which has now been extended to 31 March, 2023. Now, to buy this annuity scheme, and if you are a senior citizen you can invest your lumpsum money till 31 March,2023.In the current scenario, when the banks FD rates are declining, an investment in PMVVY would be a favourable option to the senior citizens.
6. Pradhan Mantri Awas Yojana (PMAY) Scheme Deadline Extension for Middle Income Groups: The PMAY credit linked subsidy scheme was launched by the government with the objective for ‘Housing for all’where the eligible first-time home buyers are allowed upfront interest subsidy. In this scheme, the middle-class families whose income is between Rs. 6 lakh to Rs. 12 lakh and between Rs.12 lakh-Rs. 18 lakh will get an interest subsidy at the rate of 4% and 3% respectively on the loan amount. The government has now announced the extension to the deadline for affordable housing CLSS Scheme for another one year i.e. till 31 March, 2021 to avail such scheme.So, if a taxpayer is planning to purchase their first home on loan, this scheme can be beneficial as due to the outbreak of Covid-19 there would be a slowdown in the real estate sector.
7. Reduction in Repo Rate: Because of the disruption caused by the covid-19 pandemic, RBI has reduced the repo rate by 40 basis points to 4%. This has led to a situation of decline in the lending rates as well as deposit rates. Thus, on one hand, the interest rates on home loans to existing as well as new borrowers may come down and they can invest in their home buying plans but on the other hand it also means reduction in interest rate on fixed deposits which shall be worrying the financial plans.
I hope the above referred measures will help in making some informed decisions for your benefit. And in case of any doubt arising, don’t forget to consult your financial advisor.