In order to promote cashless or less cash economy many efforts are done by our Prime Minister and Finance Ministry. Recently, our Finance Minister ArunJately announced the huge tax benefit that can be availed by the small traders, businessman, workshops, etc.Under the existing Section 44AD of the Income-Tax Act, 1961, 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.In this regards, the Ministry said the required legislative amendment will be carried out in the Finance Bill 2017 which will be tabled with the Union Budget 2017-18.
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. And for the amount of turnover received through digital means the presumed tax rate will be 6% of total turnover or gross receipts.
Reducing tax rates aims to promote the digital transactions.
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