BackDigital push to help small traders save up to 46% in tax: Govt
Apart from making a tax saving of 46% by migrating to banking mode, the small businesses would be able to build their books which may also help them get bank loans easily
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New Delhi: Small merchants with a turnover of up to Rs2 crore will be able to make a tax saving of up to 46% by migrating to digital mode, the finance ministry said on Tuesday.
Given the ease of recording digital transactions, the small businesses would also be able to build their books which may also help them get bank loans easily.
The transactions carried out through banking channels will also lead to a zero tax liability for anybody having annual turnover up to Rs66 lakhs, after availing the benefit of section 80C of the new amended tax structure.
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All the investments made under 80C up to Rs1.5 lakhs is eligible for tax exemptions. These exemptions are not just limited to investments but also include payments that may be made towards expenses like education fee and home loans.
The purview of tax relief is applicable to any individual, HUF (Hindu undivided family) or a partnership firm other than limited liability partnerships (LLP) carrying on any business other than transportation, agency, brokerage and commission and having a revenue of Rs2 crore or less.
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So, if a trader makes his transactions in cash on a turnover of Rs2 Crore, then his income under the presumptive scheme will then be presumed to be Rs16 lakhs @ 8% of turnover. After availing of Rs1.5 lakhs of deduction under Section 80C, his total tax liability will be Rs2,67,800. However, if he shifts to 100% digital transactions under the new announcement made, his profit will be presumed to be at Rs12 lakhs @ 6% of turnover, and after availing of Rs1.5 lakhs under Section 80C, his tax liability now will be only Rs1,44,200.
The digital transactions here includes payment received by cheque or through any other digital means.
Under the Presumptive Taxation Scheme under section 44AD of the Income-tax Act, 1961, such entities will now pay a lower 6% of deemed profit in tax instead of the current 8% of deemed profit in respect of the amount of total turnover or gross receipts received through banking channels or digital means for the financial year 2016-17. However, the existing rate of 8% will continue to apply for total turnover or gross receipts received in cash.
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“In the process of incentivizing acceptance of digital payments amongst small traders a major incentive by way of reduction in presumptive rate of income under section 44AD of income tax act has been announced. This will be a major relief and will improve the financial position of small traders. They will be on position to present better picture of their affairs of business. The bankers will come to know real business hence availability of bank finance will increase, “said B.C. Bhatia, president, the Confederation of All India Traders (CAIT).
The finance ministry had mentioned earlier that the necessary legislative amendment in this regard shall be carried out through the Finance Bill, 2017.
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