FINANCE BILL, 2017 Proposals To Promote Digital Economy

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The Tax Publishers FINANCE BILL, 2017 Proposals To Promote Digital Economy Subhodh Sharma India is now on the path of a massive digital revolution and in order to promote digital economy, certain amendments are proposed in the Finance Bill, 2017. These amendments are tried to be highlighted in the present write up. 1. Reduction in rate of presumptive income under Section 44AD Section 44AD provides for a presumptive income scheme in case of eligible assesses carrying out eligible businesses. Under this scheme, in case of an eligible assessee engaged in eligible business having total turnover or gross receipts not exceeding two crore rupees in a previous year, a sum equal to eight per cent of the total turnover or gross receipts, or, as the case may be, a sum higher than the aforesaid sum declared by the assessee in his return of income, is deemed to be the profits and gains of such business chargeable to tax under the head 'profits and gains of business or profession'. In order to promote digital transactions and to encourage small unorganized business to accept digital payments, it is proposed to amend Section 44AD w.e.f. assessment year 2017-18 to reduce the existing rate of deemed total income of eight per cent to six per cent in respect of the amount of such total turnover or gross receipts received by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date specified in sub-section (1) of Section 139 in respect of that previous year. However, the existing rate of the deemed profit of 8 per cent referred to in Section 44AD of the Act, shall continue to apply in respect of the total turnover or gross receipts received in any other mode. Thus benefit provided will be applicable to transactions undertaken in the current year 2016-17 also. 2. Disallowance of cash expenditure exceeding Rs. 10,000 while computing income from business or profession The existing provision of sub-section (3) of Section 40A provides that any expenditure in respect of which payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, shall not be allowed as a deduction. Further, sub-section (3A) of Section 40A also provides for deeming a payment as profits and gains of business of profession if the expenditure is incurred in a particular year but the payment is made in any subsequent year of a sum exceeding twenty thousand rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

FINANCE BILL, 2017

Proposals To Promote Digital Economy

Subhodh Sharma

India is now on the path of a massive digital revolution and in order to promote digital economy, certain amendments are proposed in the Finance Bill, 2017. These amendments are tried to be highlighted in the present write up.

1. Reduction in rate of presumptive income under Section 44AD

Section 44AD provides for a presumptive income scheme in case of eligible assesses carrying out eligible businesses. Under this scheme, in case of an eligible assessee engaged in eligible business having total turnover or gross receipts not exceeding two crore rupees in a previous year, a sum equal to eight per cent of the total turnover or gross receipts, or, as the case may be, a sum higher than the aforesaid sum declared by the assessee in his return of income, is deemed to be the profits and gains of such business chargeable to tax under the head 'profits and gains of business or profession'.

In order to promote digital transactions and to encourage small unorganized business to accept digital payments, it is proposed to amend Section 44AD w.e.f. assessment year 2017-18 to reduce the existing rate of deemed total income of eight per cent to six per cent in respect of the amount of such total turnover or gross receipts received by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date specified in sub-section (1) of Section 139 in respect of that previous year. However, the existing rate of the deemed profit of 8 per cent referred to in Section 44AD of the Act, shall continue to apply in respect of the total turnover or gross receipts received in any other mode.

Thus benefit provided will be applicable to transactions undertaken in the current year 2016-17 also.

2. Disallowance of cash expenditure exceeding Rs. 10,000 while computing income from business or profession

The existing provision of sub-section (3) of Section 40A provides that any expenditure in respect of which payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, shall not be allowed as a deduction. Further, sub-section (3A) of Section 40A also provides for deeming a payment as profits and gains of business of profession if the expenditure is incurred in a particular year but the payment is made in any subsequent year of a sum exceeding twenty thousand rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft.