Small businesses and traders with a turnover less than Rs 2 crore will now get tax benefits if they adopt digital means of payments. Currently, the Central Board of Direct Taxes (CBDT) considers 8% of the turnover as profit for such businesses and are taxed on the profit accordingly. The CBDT has now reduced the existing rate which is considered as profit to 6% of the amount of total turnover if the payments are done through digital payments and banking channels, according to the CBDT circular. For the portion of turnover received in cash, the deemed profit will be higher 8%. "It has been decided to reduce the existing rate of deemed profit of 8% under section 44AD of the 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," the circular read. This is a presumptive tax regime for small tax payers, who will not need to maintain elaborate account books for the same. A legislative amendment in this regard shall be carried out through the Finance Bill, 2017. This comes in the backdrop of a government panel suggestion that cash usage in the country should be charged in order to encourage people to adopt digital payments. The government committee headed Ratan Watal, principal advisor, NITI Aayog submitted a report to finance minister Arun Jaitley earlier this week detailing other strategies to push digital transactions. To push digital payments, government has been providing tax breaks.…
