Tax on presumptive income @ 6% if sales in Digital Mode w.e.f AY 2017-18
Summary :As per Finance Bill 2017 , w.e.f 01.04.2016 FY 2016-17 (AY 2017-18) proposed that the presumptive
income under Section 44AD of income tax act shall be deemed to be 6% (instead of 8%) in respect of amount received through banking channel during the previous year or before the due date for filing of return of income.
Measures for promoting digital payments in case of small unorganized businesses
The existing provisions of section 44AD of the Act, inter-alia, provides for a presumptive income scheme in case of eligible assesses carrying out eligible businesses. Under this scheme, in case of an eligible assessee engaged in eligible business having total turnover or gross receipts not exceeding two crore rupees in a previous year, a sum equal to eight per cent of the total turnover or gross receipts, or, as the case may be, a sum higher than the aforesaid sum declared by the assessee in his return of income,is deemed to be the profits and gains of such business chargeable to tax under the head “profits and gains of business or profession”.
In order to promote digital transactions and to encourage small unorganized business to accept digital payments, it is proposed to amend section 44AD of the Act to reduce the existing rate of deemed total income of eight per cent. to six per cent in respect of the amount of such total turnover or gross receipts received by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date specified in sub-section (1) of section 139 in respect of that previous year. 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 any other mode.
This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years.
Relevant Extract of Clause 21 of Finance Bill 2017
Amendment of section 44AD.
21. In section 44AD of the Income-tax Act, in sub-section (1), the following proviso shall be inserted, namely:—
‘Provided that this sub-section shall have effect as if for the words “eight per cent.”, the words “six per cent.” had been substituted, in respect of the amount of total turnover or gross receipts which is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date specified in sub- section (1) of section 139 in respect of that previous year.’.