As expected, after the demonetization drive, the government announced incentives bonanza for traders and consumers going digital. The government announced 2 per cent income tax rebate for small businesses with an annual turnover of up to Rs 2 crore for accepting payments digitally instead of cash.
The move is aimed at promoting digital transactions using credit cards, debit cards, e-wallets and internet banking, among others, to help make India a less cash society.
Hence Under section 44AD of the Income tax Act, the existing rate of deemed profit of 8 per cent has been reduced 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.
However, the existing rate of deemed profit of 8 per cent referred to in Section 44AD of the Income-Tax Act shall continue to apply with respect to total turnover or gross receipts received in cash.
The Centre has in the past few weeks announced a slew of rebates such as service charge waiver for train ticket bookings through IRCTC and concessions in online payments of insurance premium to LIC to boost digital transactions.
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