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TMI BlogPROMOTING DIGITAL ECONOMY - DIRECT TAXESX X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, apply in relation to the assessment year 2018-19 and subsequent years. [Clause 35] Disallowance of depreciation under section 32 and capital expenditure under section 35AD on cash payment Under the existing provisions of the Act, revenue expenditure incurred in cash exceeding certain monetary threshold is not allowable as per sub-section (3) of section 40A of the Act except in specified circumstances as referred to in Rule 6DD of the Income-tax Rules, 1962. However, there is no provision to disallow the capital expenditure incurred in cash. Further, section 35AD of the Act , inter-alia provides for investment linked deduction on the amount capital expenditure incurred, wholly or exclusively for the purposes of business, during the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, shall not be allowed as a deduction. Further, sub-section (3A) of section 40A also provides for deeming a payment as profits and gains of business of profession if the expenditure is incurred in a particular year but the payment is made in any subsequent year of a sum exceeding twenty thousand rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft. In order to disincentivise cash transactions, it is proposed to amend the provision of section 40A of the Act to provide the following: (i) To reduce the existing threshold of cash payment to a person from twenty thousand rupees to ten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in his return of income, is deemed to be the profits and gains of such business chargeable to tax under the head profits and gains of business or profession . In order to promote digital transactions and to encourage small unorganized business to accept digital payments, it is proposed to amend section 44AD of the Act to reduce the existing 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 in respect of that previous year. However, the existing rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons to be recorded in writing, on whom the proposed restriction on cash transactions shall not apply. Transactions of the nature referred to in section 269SS are proposed to be excluded from the scope of the said section. It is also proposed to insert new section 271DA in the Act to provide for levy of penalty on a person who receives a sum in contravention of the provisions of the proposed section 269ST. The penalty is proposed to be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention. It is also proposed that any such penalty shall be levied by the Joint Commissioner. It is also proposed to consequentially amend the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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