New Delhi: Small traders and businesses with a turnover of up to Rs 2 crore will pay less tax if they accept payments through banking and digital means, Finance Minister Arun Jaitley said on December 20.
He said in the Budget for 2016-17, small traders and businessmen, with turnover of up to Rs 2 crore who did not maintain proper accounts, were presumed to have earned 8 per cent income or profit for tax purposes.
But if they use digital modes of payments, their income will now be presumed to be 6 per cent of the turnover and not 8 per cent.
"A very important change has been made (with) a new notification amending the earlier order which was announced during the course of budget 2016-17. "All small traders, businessmen and workshop owners whose total turnover is less than Rs 2 crore a year may not maintain any books of account and their income was presumed to be 8 per cent of turnover. Now this order has been amended. And to the extent that they deal digitally or through cheques and banking transactions the presumptive income will not be 8 per cent but will be 6 per cent," he told reporters here.
To the extent that they deal in cash their presumptive income will be 8 per cent, he said.
"Therefore the object of this order is that those who deal in digital or through a banking transaction mode their income will be presumed to be 2 per cent less that is 6 per cent and accordingly this will constitute a major tax relief to be given to them," he said.
Earlier in the day, the CBDT in a communication said that under the existing Section 44AD of the Income-Tax Act, 1961, in case of certain assesses (an individual, HUF or a partnership firm other than LLP) carrying on any business having a turnover of Rs 2 crore or less, the profit is deemed to be 8 per cent of the total turnover for taxation.
"...it has been decided to reduce the existing rate of deemed profit of 8 per cent under section 44AD of the Act to 6 per cent in respect of the amount of total turnover or gross receipts received through banking channel/digital means for the financial year 2016-17," the Central Board of Direct Taxes (CBDT) said.
The decision has been taken to achieve the government's mission of moving towards a less cash economy and to incentivise small traders/businesses to proactively accept payments by digital means, it said.
