Section 44AD : Income Tax Rates if sales in Digital mode w.e.f AY 2017-18

By | February 20, 2018
(Last Updated On: February 20, 2018)

CIRCULAR No. 2/2018 Dated 15.02.2018

24. Measures for promoting digital payments in case of small unorganized businesses.

24.1 The provisions of section 44AD of the Income-tax Act provide inter alia for a presumptive income scheme in case of eligible assesses carrying out eligible businesses. Before amendment by the Act, 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, was deemed to be the profits and gains of such business chargeable to tax under the head “profits and gains of business or profession”.

24.2 In order to promote digital transactions and to encourage small unorganized business to accept digital payments, section 44AD of the Income-tax Act has been amended to reduce the 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 of the Income-tax Act in respect of that previous year. However, the rate of deemed profit of 8% referred to in section 44AD of the Income-tax Act shall continue to apply in respect of total turnover or gross receipts received in any other mode.

24.3 Applicability: This amendment takes effect from 1st April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years.

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