Modified norms to lower taxes of small traders by 30%: FM

Finance Minister Arun Jaitley today said the government's decision to tweak the presumptive income norms would reduce the tax liability by up to 30 per cent for those small traders opting for digital transactions.

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.

"So he will get a significant tax benefit. 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," Jaitley told reporters here.

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.