Centre to provide tax benefit to small business

New Delhi: The government on Monday announced that small traders and businesses with a turnover of upto Rs 2 crore will pay two per cent  less tax on turnover generated from consumers through digital means to promote cashless economy.

The government will soon bring a legislation in the budget session on this in the Parliament.

As per 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 '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. “However, the existing rate of deemed profit of 8 per cent referred to in section 44AD of the Act, shall continue to apply in respect of total turnover or gross receipts received in cash,” the tax department added.

Legislative amendment in this regard would be carried out through the Finance Bill, 2017, the CBDT added.

The government is trying to push transactions through digital payment and has already announced discounts for payment through on-line banking, credit and debit cards and e-wallets for select services. Oil marketing companies are providing discount of 0.75 per cent on petrol and diesel on fuel purchases made using digital payment.