Home Economy and Finance Small businesses with turnover up to ₹1.5 crore can become income tax free due to full rebate

Small businesses with turnover up to ₹1.5 crore can become income tax free due to full rebate

The section 87A of the Income Tax has been amended to provide full tax rebate up to taxable income of ₹5 lakhs

In the interim budget presented by caretaker finance minister Piyush Goyal on February 1, a major relief has been provided to the income taxpayers, with the increase in the threshold for the rebate. Now, full tax rebate has been provided for taxable income up to ₹5 lakhs under section 87A of the Income Tax Act. This means, if the net taxable income after all eligible deductions and exemptions come down to ₹5 lakh or lower, one will need not to pay any income tax.

This rebate will benefit an estimated 3 crore middle-class taxpayers comprising self-employed, small business, small traders, salary earners, pensioners and senior citizens, and the total tax benefit is estimated to be ₹18,500 crore.

Thus, even if a salaried person earns ₹75,000 per months, that person may not need to pay income tax, provided he/she is able to take the benefits of various exemptions available under the Income Tax Act. In fact, if a person earns a salary income of ₹9.75 lakhs and earns ₹10,000 as interest income, such taxpayers can take the benefit of the full income tax rebate.

- Ad - - article resumes -

But it is not only salaried people who benefit from this, other than the standard deduction which is available only for salaried income, other exemptions and the rebate is applicable for all categories of taxpayers. Due to this, small businesses and traders having an annual turnover up to ₹1.5 crore may not need to pay any income tax.

The section 44AD of the Income Tax Act provides the small businesses with the option to use a presumptive profit to calculate tax liabilities instead of maintaining accounts for the same. Businesses and trades having annual turnover up to ₹2 crore can use the presumptive taxation scheme. For such businesses, 6% of the annual turnover is taken as income of the taxpayer, and income tax will be calculated on this amount. For this, all the transactions in the business must have taken place via digital mode, including cheques, demand drafts, debit and credit cards, and any other cashless mode. For businesses doing business in cash, the rate of presumptive income is 8%.

Now, let’s take the case of income tax a small business with cashless transaction having an annual turnover of ₹1.5 crore in cashless transactions in both pre-budget and post-budget scenario.

ParticularsBefore Interim BudgetAfter Interim Budget
Total Turnover of Business₹1,50,00,000₹1,50,00,000
Presumptive profit rate (@6%)16%6%
Profit as calculated u/s 44AD₹9,00,000₹9,00,000
Income from other sources (Interest on Savings Bank Account)₹10,000₹10,000
Gross Taxable Income₹9,10,000₹9,10,000
Deduction under Section 80C (Investments)(₹1,50,000)(₹1,50,000)
Deduction under Section 80CCD (1B) (Contribution to NPS)(₹50,000)(₹50,000)
Deduction under Section 80D (Medical Insurance)(₹25,000)(₹25,000)
Deduction under Section 80TTA (Interest on Savings Bank Account)(₹10,000)(₹10,000)
Deduction under Section 24 (Home Loan Interest)(₹2,00,000)(₹2,00,000)
Net Taxable Income₹4,75,000₹4,75,000
Income Tax₹11,250₹11,250
Less: Rebate under section 87A (Full rebate upto Rs. 12,500)Nil(11,250)
Total tax payable after Rebate₹11,250Nil
Health & Education Cess @4%₹450Nil
Total Income Tax Payable11,700Nil

 

Therefore, while earlier the taxpayer would have to pay ₹11,700 as income tax including cess, now full rebate of tax can be obtained, if various exemptions are claimed.

A business using presumptive income need not keep detailed accounts for taxation, also there is no requirement of an audit of books.

Professionals also can file income tax returns using presumptive income under section 44ADA of Income Tax act. But in the case of professionals, the income is taken at 50% of turnover, up to ₹ 50 lakhs in a year.

Help Opindia Reach Every Indian. Share This Post
We need your support to survive in the media industry. Please consider paying us for the content we produce:

To know more about these payments, please click here.


Big Story

A viral video has been shared several times on Social Media where a railway official can be seen taking money from a poor man travelling on the train.

2019 World Cup Is Here!

Catch the latest on Cricket World Cup as it unfolds, special coverage by Opindia

Proud to be a brand - Made in India?
Now, Advertise on Opindia

Who is Prime Minister Modi’s ‘very special friend’ who came to meet him in the Parliament today?

Prime Minister Modi today shared images with a 'very special friend' who had come to meet him at the Parliament.
Exclusive interview with BLF chief Dr Allah Nazar Baloch with OpIndia

Pakistan plundering Balochistan, we appeal PM Modi to support freedom struggle: Dr Allah Nazar Baloch of BLF speaks exclusively to OpIndia

Away from the glare of the world that often talks tall on Human Rights and the rights of the indigenous people, Balochistan bleeds at the hands of Pakistan. OpIndia interviews founder and chief of Balochistan Liberation Front, Dr Allah Nazar Baloch

Uttar Pradesh: After Triple Talaq, Man pressurizes wife to undergo nikah halala with his brother and uncle

Rabiya further stated that when she refused to give in to her husband's demands, she was thrashed and thrown out of the house.

Hey, New York Times, F**k you, again

India successfully tested anti-satellite missile today, springing it into the elite space club.

Senior citizen who used to put lizards in his own food on trains to get free meal caught by railway officials

A senior citizen named Surender Pal, in his 70s was found guilty of contaminating his own meal to get free ones from the national transporter
Donald Trump lies in the most foolish manner about PM Modi and the Kashmir issue

Had Donald Trump taken time to educate himself about world affairs before becoming President, he would not look foolish

For Donald Trump to lie about something so elementary as India's stand on Kashmir, only goes to show how terribly ignorant the President truly is.

Is there a concerted attempt to sow doubts against PM Modi among his most loyal base?

By now, everyone of us who is out there on social media is aware of this strange new phenomenon.

Live updates Karnataka Trust Vote: Karnataka Government has fallen

JDS-Congress government of Karnataka is facing their second floor test after assembly elections were held in May last year.

Himalayan Blunder : When India gave up on Tibet and what it needs to do now

During Rajiv Gandhi's 1989 visit to China, Deng Xiaoping had suggested: "Let both sides forget the unpleasant period in our past relations and let us treat everything with an eye on the future."30 years have since passed, however, the future is yet to arrive in India, Tibet and China relations.
Image Source: Moneycontrol

Karnataka Congress-JDS coalition government collapses after it fails to get trust vote passed in Assembly

After days of drama, CM Kumaraswamy finally moved the trust vote today that failed to pass in the Assembly. As a result, the Karnataka government has officially collapsed
Subscribe to Day's Top Stories
- Advertisment -

Latest articles

Connect with us

173,806FansLike
160,686FollowersFollow
74,950SubscribersSubscribe
Help Opindia Reach Every Indian. Share This Post