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Digital push to help small traders save up to 46% in tax: Government
Posted by : Anonymous on Dec 21,2016 08:35 AM
Dec 20,2016 : Government today said small traders will be able to save up to 46 per cent in tax by migrating from cash to digital transactions as the decision to tweak the presumptive income norms would reduce tax liability.
"Apart from making a tax saving of almost 46 per cent by migrating to banking mode, the small businesses would be able to build their books which may also help them get bank loans easily," the
said in a statement.
Also, if transactions are carried out through banking channels, then anybody having annual turnover up to Rs 66 lakhs will have zero tax liability after availing the benefit of Section 80C, after amendment of this new rate structure, it said.
Earlier in the day, Finance Minister
said "The object is if you do transactions using digital mode then you can pay less tax. It is a tax incentive to support digitisation of the economy. And if we calculate it, then some traders would get over 30 per cent tax advantage if he transacts through digital mode."
Under the existing Section 44AD of the Income-Tax Act, 1961, in case of certain assessees (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.
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 mode of payments, their income will now be presumed to be 6 per cent of the turnover and not 8 per cent.
Following decision to demonetise old Rs 500/1,000 notes, the government has taken several measures to encourage digital payments to promote less cash economy.
Citing example, the statement said, if a trader makes his transactions in cash on a turnover of Rs 2 crore, then his income under the presumptive scheme will then be presumed to be Rs 16 lakhs at the rate of 8 per cent of turnover.
After availing of Rs 1.5 lakh of deduction under Section 80C, his total tax liability will be Rs 2,67,800.
However, if he shifts to 100 per cent digital transactions under the new announcement made, his profit will be presumed to be at Rs 12 lakh at the rate of 6 per cent of turnover, and after availing of Rs 1.5 lakh under Section 80C, his tax liability now will be only Rs 1,44,200.
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