A hawker selling fruits pushes his hand cart on a deserted road, as nationwide lockdown continues over the highly contagious coronavirus (COVID-19) on April 03, 2020 in New Delhi, India. (Photo by Yawar Nazir/Getty Images)

India’s Finance Minister Nirmala Sitharaman on Wednesday announced Rs 3 trillion ($40 billion) of collateral-free loans for small businesses, cut the tax rate for non-salary payments and provided liquidity to non-banking companies to help them tide over the disruptions caused by the lockdown.

Announcing the first set of components of the Rs 20 trillion ($265 billion) COVID-19 economic stimulus package announced by the Prime Minister Narendra Modi, she said Rs 900 billion liquidity infusion will be made in electricity distribution companies to help them fight the current financial stress.

Dates for filing income tax returns and other assessments have been extended.

She said the rate of tax deducted at source (TDS) and tax collected at source (TCS) for non-salaried payments up to March 31, 2021, will be cut by 25 per cent.

The move will release Rs 500 billion in the system, she said.

The minister also extended by three months the government support to companies with less than 100 employees to meet retirement fund obligations.

For all companies, the statutory obligation to pay 12 per cent of basic salary as employer’s share to employee provident fund (EPF) contribution has been reduced to 10 per cent to boost their liquidity.

To boost construction, all government agencies will give up to 6-months extension to all contractors to complete construction, and goods and service contracts.

“Essentially this is to spur growth and to build a very self-reliant India,” she said. “It addresses ease of doing business, compliance, and due diligence and the intention is also to build local brands.”

The Prime Minister had on Tuesday evening announced the raising of spending to Rs 20 trillion or about 10 per cent of India’s GDP, to help the economy get back on its feet after weeks of the lockdown.

Sitharaman said collateral-free loans will benefit 4.5 million small businesses.

The loan will have 4-year tenure and will have a 12-month moratorium, she said, adding the loans will be guaranteed by the government.

In addition, Rs 200 billion subordinate debt will be provided for stressed or loan defaulting MSMEs, she said, adding this would benefit 200,000 such businesses.

A fund of funds for MSME is also being created, which will infuse Rs 500 billion equity in MSMEs with growth potential.

The government also changed the definition of MSMEs to allow units with higher investment as well as introduced turnover criteria to allow more companies to remain small businesses to get fiscal and other benefits.

To help them get more business, global tenders for government procurement up to Rs 2 billion will be barred.

The Finance Minister announced a Rs 300 billion special liquidity scheme for non-banking financial institutions (NBFCs), housing finance firms (HFCs) and microfinance institutions (MFIs) with a view to provide credit support to them and create confidence in the market.

Further, a Rs 450 billion partial credit guarantee scheme 2.0 was also announced for NBFCs, HFCs, and MFIs with low credit rating to help them extend a loan to individuals and MSMEs.