NEW DELHI, Dec 20:
Government today said small traders will be able to save up to 46 per cent in tax by migrating from cash to digital transactions as the decision to tweak the presumptive income norms would reduce tax liability.
“Apart from making a tax saving of almost 46 per cent by migrating to banking mode, the small businesses would be able to build their books which may also help them get bank loans easily,” the Finance Ministry said in a statement.
Also, if transactions are carried out through banking channels, then anybody having annual turnover up to Rs 66 lakhs will have zero tax liability after availing the benefit of Section 80C, after amendment of this new rate structure, it said.
Earlier in the day, Finance Minister Arun Jaitley said “The object is if you do transactions using digital mode then you can pay less tax. It is a tax incentive to support digitisation of the economy. And if we calculate it, then some traders would get over 30 per cent tax advantage if he transacts through digital mode.”
Under the existing Section 44AD of the Income-Tax Act, 1961, in case of certain assessees (an individual, HUF or a partnership firm other than LLP) carrying on any business having a turnover of Rs 2 crore or less, the profit is deemed to be 8 per cent of the total turnover for taxation.
He said in the Budget for 2016-17, small traders and businessmen, with turnover of up to Rs 2 crore who did not maintain proper accounts, were presumed to have earned 8 per cent income or profit for tax purposes. But if they use digital mode of payments, their income will now be presumed to be 6 per cent of the turnover and not 8 per cent.
Following decision to demonetise old Rs 500/1,000 notes, the Government has taken several measures to encourage digital payments to promote less cash economy.
Citing example, the statement said, if a trader makes his transactions in cash on a turnover of Rs 2 crore, then his income under the presumptive scheme will then be presumed to be Rs 16 lakhs at the rate of 8 per cent of turnover.
After availing of Rs 1.5 lakh of deduction under Section 80C, his total tax liability will be Rs 2,67,800.
However, if he shifts to 100 per cent digital transactions under the new announcement made, his profit will be presumed to be at Rs 12 lakh at the rate of 6 per cent of turnover, and after availing of Rs 1.5 lakh under Section 80C, his tax liability now will be only Rs 1,44,200.
Jaitley said the Reserve Bank was fully prepared to deal with currency shortages post demonetisation and has enough currency in its chests to last “far beyond”.
“There was full preparedness. There was not a single day when RBI had not released adequate currency to banks. There was a certain level of currency that was to be released and there was full preparedness for it,” Jaitley said.
He said RBI has maintained the stock of currency through advance as well as current printing level.
“Today also RBI has more than adequate stock not only to last them for December 30 but to last them far beyond that,” he said.
Asked about the currency in circulation, Jaitley said the figures will be made public only after accurate calculation after December 30, the last date for depositing the scrapped currency in banks.
“The currency which got printed might have gone to Post Offices and from there to banks and again back to currency chest so there could be double counting and scope for inaccuracies. So we do not want to guess the figures (of currency in circulation),” he said.
Economic Affairs Secretary Shaktikanta Das said the currency situation has considerably improved since November 8 and there is adequate currency with RBI to meet the demand till December 30.
While announcing the demonetising the Rs 500 and Rs 1,000 notes on November 8, Prime Minister Narendra Modi had asked holders of such notes to deposit them in banks.
He said notes of Rs 500 and Rs 2,000 with new design and more security features were being introduced in the market.
The scrapped currency made up for 86 per cent or over Rs 15.45 lakh crore of notes in circulation as on November 8.
Before the announcement of demonetisation, the Government had already arranged for the printing of 200 crore Rs 2,000 notes, or roughly about Rs 4 lakh crore in value. They were the first set of notes to be circulated.
Thereafter, a new Rs 500 note was introduced and now all the four printing presses of RBI at Dewas in Madhya Pradesh, Nashik in Maharashtra, Salboni in West Bengal and Mysuru in Karnataka are working overtime to replenish the exhausted currencies.
Post demonetisation use of all parallel and alternative modes of digital payments, credit/debit cards have increased significantly, Jaitley said. “There is significant jump in digital transactions, by over 300 per cent in some cases. Where base was low, it is 1,500 per cent”.
Replying to queries on curbs on deposit of old currency notes by RBI, he said people should go and deposit the now- defunct notes in one go as repeat deposits raise doubts.
He added: “Today there are no exemptions… Now there is no further scope of earning old currency so those who have got old currency must go and deposit in one go.
“Therefore if somebody goes everyday and deposit old currency it raises suspicion. How is he getting everyday? As long as exemptions existed there was scope for getting old currency, but once the exemptions have been lifted if you have old currency go and deposit in one go.”
With nearly Rs 13 lakh crore, out of the Rs 15.4 lakh crore worth of Rs 500 and Rs 1,000 notes junked, already deposited in banks, RBI yesterday changed rules to mandate that individuals can deposit over Rs 5,000 in old currency bills only once until December 30 and that too after explaining why it had not been done so far.
Clarifying the rules, Jaitley later in night had said no questions will be asked if any amount of junked currency is deposited in one go but repeated deposits may raise queries.
“If they go and deposit with bank any amount of currency no questions are going to be asked to them and therefore the 5000 rupee limit does not apply to them if they go and deposit it once.
“But if they are going to go everyday and deposit some currency, same person, that gives rise to suspicion that where is he acquiring this currency from. In that event a person may have something to worry about. Therefore everyone is advised whatever old currency you have please go and deposit it now,” Jaitley had said. (PTI)
Follow our WhatsApp channel
