wordpress blog stats
Connect with us

Hi, what are you looking for?

Small businesses who accept digital payments will attract lower taxes

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.

Advertisement. Scroll to continue reading.

To push digital payments, government has been providing tax breaks. Last week, to boost usage of debit and credit cards for small value transactions, the government waived off service tax for transactions up to Rs 2,000Note that this exemption applies only to the MDR (a bank interchange fee) which banks levy on merchants and not on the whole Rs 2,000.

The government is now rapidly scaling its efforts to build a card acceptance infrastructure following the demonetization of Rs 500 and Rs 1000 notes. It has ordered banks to install 10 lakh POS terminals in the country by March 2017 to ease the woes of a cash crunch. Accordingly, to facilitate this, the government has also removed excise duty on the import of goods for the manufacturing of POS  machines.

You May Also Like


Digital payment transactions through Prepaid Payment Instruments — which includes both Mobile Wallets and PPI Cards combined —stood 438.7 million transactions  at the end...

MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ

Subscribe to our daily newsletter
Your email address:*
Please enter all required fields Click to hide
Correct invalid entries Click to hide

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ