Wednesday, December 21, 2016

Govt. aims to reduce Presumptive Tax Rate to 6% for digital receipts during FY 2016-17

Recent demonetization drive of the Government has encouraged people to shift towards digital mode of payment while making financial transactions. By adopting digital mode of payments, no financial transactions would remain undisclosed and, consequently, an enhanced turnover of business might get reflected in the books of account.The existing provisions of section 44AD provide that 8% of turnover would be deemed as presumptive profit in case of certain assesses having a turnover of Rs 2 crore or less.

In order incentivise small traders to proactively accept payments by digital means, Govt. has decided to reduce the existing rate of deemed profit under Section 44AD from 8% to 6% in respect of the turnover or gross receipts through digital means for the Financial Year 2016-17. However, the existing rate of deemed profit of 8% referred to in section 44AD, shall continue to apply in respect of total turnover or gross receipts in cash. Such changes would be effective once amendments are brought to Section 44AD by the Finance Act, 2017.
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