MANU/PIBU/1072/2016
Department/Board : Press Information Bureau
Date : 20.12.2016
Measures for Promoting Digital Payments and Creation of Less-Cash Economy: Benefit of lower rate of Income Tax on digital turnover for small businesses
The benefit of lower rate of Income-tax on digital turnover for small businesses up to a turnover of Rs.2,00,000,00 (Rupees Two Crore), announced by the Government yesterday under Section 44AD of the Income-tax Act, 1961 is a huge benefit given to businessmen for promoting digital/banking transactions. The benefits given are explained in the following paragraph.
If a trader makes his transactions in cash on a turnover of
Rs. Two Crore, then his income under the presumptive scheme will then be presumed to be Rs. 16 lakhs @ 8% of turnover. After availing of Rs. 1.5 lakhs of deduction under Section 80C, his total tax liability will be Rs. 2,67,800/-. However, if he shifts to 100% digital transactions under the new announcement made, his profit will be presumed to be at Rs. 12 lakhs @ 6% of turnover, and after availing of Rs. 1.5 lakhs under Section 80C, his tax liability now will be only Rs.1,44,200/. Here, digital transaction includes payment received by Cheque or through any other digital means. In the following example, the benefit obtained by traders and small businesses is explained in 3 different scenarios:
|
Particulars
|
100% Cash Turnover (Rs.)
|
60% Digital Turnover (Rs.)
|
100% Digital Turnover (Rs.)
|
|
Total Turnover
|
2 Crore
|
2 Core
|
2 Crore
|
|
Cash Turnover
|
2 Crore
|
0.80 Crore
|
NIL
|
|
Digital Turnover
|
NIL
|
1.2 Crore
|
|