Govt to reduce rate of deemed profit in I-T Act to 6% for non-cash receipts
19 December 2016
The government has decided to reduce the existing rate of deemed profit of 8 per cent under section 44AD of the Income Tax Act to 6 per cent of total turnover or gross receipts received through banking channels / digital means for the financial year 2016-17.
However, the existing rate of deemed profit of 8 per cent referred to in section 44AD of the I-T Act, will continue to apply in respect of total turnover or gross receipts received in cash.
Under the existing provisions of section 44AD of the Income-tax Act, 1961, in case of certain assesses (ie, an individual, HUF or a partnership firm other than LLP) carrying on any business (other than transportation, agency, brokerage and commission) and having a turnover of Rs2 crore or less, the profit is deemed to be 8 per cent of the total turnover.
In order to achieve the government's mission of moving towards a less cash economy and to incentivise small traders / businesses to proactively accept payments by digital means, it has been decided to reduce the existing rate of deemed profit of 8 per cent to 6 per cent in respect of the amount of total turnover or gross receipts received through banking channel / digital means for the financial year 2016-17, a finance ministry release stated.
Legislative amendment in this regard will be carried out through the Finance Bill, 2017, the release added.