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Economic package : Part 1 – Important announcements relevant to the IT sector

Blog: NASSCOM Official Blog

On 13th May, the Finance Minister made the first set of announcements, on the economic package. The measures focused on providing much needed liquidity infusion, esp in the MSME sector. Given the urgent need for liquidity in the sector, it’s a very welcome move and should help the tech startups and smaller IT-ITES SMEs. We look forward to this being executed quickly. In the next set of announcements, we hope to see steps towards boosting demand and consumption. Also, for IT, we urgently need the extension of tax benefits available for SEZ to enable our cos stay competitive.

Important announcements relevant to the IT sector with comments below.


Comments: Massive change in coverage of  definition. Given that smaller companies are the most vulnerable, this is an important step to design specific measures to support them.

Comments: Provides for credit extension with minimal additional procedures. This will be a faster way to generate cash for immediate essential needs.

Comments: This is in line with NASSCOM’s suggestion made to the FM. This will enhance capital availability for MSMEs.

Comments : This is in line with NASSCOM’s suggestion made to the FM. Will ease cash flow constraints of MSMEs.

Comments : Move to benefit Indian companies.


Comments : Only organisations with less than 100 employees, with atleast 90% employees earning less than Rs.15000, are eligible to avail this benefit.

Comments : Would free up a part of the wage cost for companies, and would help in easing cash flow constraints. Employees take home salary will increase.


Comments : Earlier this year, as part of the budget, the TDS for technical services was brought down 10% to 2%. TDS would further come to 1.5% now. This would reduce cash outflow and free up funds to be redirected for other needs.

Comments : Will benefit those individuals/institutions planning to settle tax disputes. No additional penalty or interest to be levied if this option be used.

Comments : Additional time, would be useful, given the lockdown.


Comments : Companies facing project delays due to disruption of work in the last two months, will be benefitted.

Expectation of IT-ITeS industry which were not covered.

  1. Fiscal support of Rs.2600 crores to small IT-ITES companies, to cover 50% of the employees’ salary for a period of 3-months, so that companies do not have to undertake layoffs and employees can be redeployed once normalcy returns.
  2. Extension of tax benefits available to SEZ, for another 5 years.
  3. Utilisation of MAT credits in the new income taxation regime, which allow income tax at 22%.

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