The action aims to ensure that small businesses receive their payments from customers promptly.
According to current regulations, companies with sales of up to Rs. 2 crore can sign up for presumptive taxation.
Nirmala Sitharaman, the union finance minister, suggested raising the threshold for presumptive taxes for professionals and micro businesses on Budget day. Presenting the budget for FY2023–24, the minister suggested raising the income thresholds for professionals and small businesses to qualify for the presumptive taxation programme from Rs 50,000 to Rs 75,000.
Presumptive Income Scheme
Businesspeople and professionals must maintain regular books of accounts following the Income-tax Act of 1961. Additionally, they need to file income tax reports and have their finances audited (ITRs). However, the presumptive taxation scheme (PTS) was developed to provide relief to small taxpayers.
According to current regulations, companies with sales of up to Rs. 2 crore can sign up for presumptive taxation in which case 6% or 8% of their gross receipts will be considered their income, subject to certain conditions.
Micro, small, and medium-sized enterprises (MSMEs), according to Sitharaman, are the backbone of our economy’s expansion. Micro businesses with annual revenue up to Rs 2 crore and some professionals with annual revenue up to Rs 50 lakh can benefit from presumptive taxes. For taxpayers with cash receipts of no more than 5%, FM suggests giving them increased ceilings of Rs 3 crore and Rs 75,000, respectively.
The budget suggested allowing a deduction for expenses incurred on payments made to MSMEs only when payment was actually made in order to encourage MSMEs in the timely receipt of payments. The action aims to ensure that small businesses receive their payments from customers promptly. Previously, the government had mandated that major corporations notify of any payment delays to small enterprises.
According to Sitharaman, the Income Tax Department has consistently worked to enhance taxpayer services by facilitating simple and straightforward compliance. For professionals, the earnings and gains from business are considered to be an amount equivalent to 50% of the gross receipts.
According to the Memorandum outlining the provisions of the Finance Bill, 2023, suggestions for raising the eligibility thresholds for qualified businesses and professions to take advantage of presumed schemes in order to help more people in the small and medium segments have been received. In order to facilitate compliance and encourage non-cash transactions, it was suggested that threshold restrictions be raised.
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