on Tuesday said small traders will be able to save up to 46 per cent in tax
by migrating from cash
transaction mode, as the decision to tweak the presumptive income
norms would reduce tax
“Apart from making tax
saving of up to 46 per cent by migrating to digital
mode, small traders would be able to build their books which may help them get loans easily,” finance
ministry said in a statement.
Also, if transactions are carried out through banking
channels, then anybody having annual turnover of up to Rs 66 lakhs will have zero tax
liability after availing the benefit of Section 80C, after amendment of the rate structure, it said.
Earlier in the day, Finance
Minister Arun Jaitley
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. Some traders would get more than 30 per cent tax
advantage if they make transactions through digital
Under the existing Section 44AD of the Income-Tax
Act, 1961 — an individual, Hindu undivided family or a partnership firm other than limited liability partnership — 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
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.