Finance minister Arun Jaitley has outlined an inducement for small merchants and businesses to save up to 46 per cent in tax – by going cashless, thereby entering the banking system.
Jaitley himself explained the possible ways to save tax for small-scale merchants - advice and tricks that are usually imparted by chartered accountants.
By going cashless, small businesses will able to maintain books and thus become eligible for loans at low interest rates.
Jaitley said, ''Apart from making a tax saving of almost 46 per cent by shifting to banking mode, the small merchants would be able to form their books, which may also help them get bank loans easily.''
According to the changes in the Income-Tax Act, 1961, the government has provisioned tax benefits for small sellers once they choose to conduct business via banking channels.
As per the new rules, any business having an income of less than Rs66 lakh will have zero tax charge if they avail of benefits of Section 80C.
Under the same Section 80C, if a retailer operates business via 100-per cent digital mode, then his business would be responsible for paying 30 per cent less tax.
For instance, under the current section 44AD of the income-Tax Act, if any organization conducts a business having revenue of more than Rs2 crore, then the I-T department takes up 8 per cent profit of the total gross income, which is liable for tax. Currently this is only for those entities that don't maintain their papers and conduct business mainly through cash.
Now, if you receive Income Tax Department Notice on Depositing above Rs2.5 lakh, don't fear. As per the changes to the Act, if a company does 100 per cent of transactions via digital mode, then the I-T Department will assume 6 per cent of profit on the revenue of Rs2 crore, thereby promoting a direct 2 per cent on the overall tax paid.
These tax changes were introduced after the demonetisation of old currency on 8 November.