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Govt gives tax break to small businesses on digital receipts of money

Businesses with turnover up to Rs 2 crore will have to pay less tax on electronic payment receipts as compared to on receipts/payments received in cash.

For businesses with turnover up to Rs 2 crore, it has been decided to reduce the existing rate of deemed profit of 8% under section 44AD of the Income Tax Act to 6% in respect of the amount of total turnover or gross receipts received through banking channel / digital means for the financial year 2016-17, according to a press release from the Central Board of Direct Taxes here today.
However, the existing rate of deemed profit of 8% referred to in section 44AD of the Act, shall continue to apply in respect of total turnover or gross receipts received in cash, the release clarifies.

Under the existing provisions of section 44AD of the Income-tax Act, 1961 (the Act), in case of certain assesses (i.e. an individual, HUF or a partnership firm other than LLP) carrying on any business (other than transportation, agency, brokerage and commission) and having a turnover of Rs 2 crore or less, the profit is deemed to be 8% of the total turnover. This step is being taken to encourage these businesses to move towards a less cash economy and to incentivise small traders / businesses to proactively accept payments by digital means.

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