The finance ministry has issued draft proposals for facilitating electronic transactions that are aimed at bringing transparency in the economy and promoting cashless payments.
The ministry said that the objective is to improve the ease of conducting transactions for individuals and cut costs of managing cash. The decision, once implemented, will also go a long way in reducing tax avoidance that is rampant because of cash payments. The government said that the by facilitating electronic transactions, it will be able to build a transactions history which will in turn help customers in getting loans easily and will help in financial inclusion.
It said, "One way to curb the flow of black money is to discourage transactions in cash. Now that a majority of Indians has or can have, a RUPAY debit card. I therefore, proposes to introduce soon several measure that will incentivize credit or debit card transactions and disincentivize cash transaction".
E-transactions are defined as transactions in which the customer authorizes the transfer of money through electronic means, and the funds flow directly from one account to another.
The ministry said that it aims to replace the use of cash by providing necessary incentives to use e-transactions.
To give this initiative a major boost, the ministry is also planning to offer income tax benefits to consumers for paying a certain portion of their expenditure through electronic means. It also said ,"Tax benefits could be provided to merchants for accepting electronic payments, e.g. an appropriate tax rebate can be extended to a merchant if at least say 50% value of the transactions is through electronic means. Alternatively, 1-2% reduction in value added tax could be considered on all electronic transactions by the merchants."
Here are 6 ways that electronic payments will save you money:
1. At present, there is a Merchant Discount Rate (MDR) of 0.75% on Debit Card transactions upto Rs.2000 and 1% on all transactions above Rs.2000. The possibility of reduction in the MDR and the rationalization of the distribution of the MDR across different stakeholders will be examined, the finance ministry said.
2. Income tax benefits to consumers and merchants, including a 1-2% reduction in value added tax on all transactions, is under consideration.
3. The government could also levy a cash handling charge on transactions greater than a specified level. This is aimed at pushing people towards using their debit or credit cards to make payments.
4. High value transactions, like more than Rs 1 lakh, could be mandated only through electronic means.
5. Currently, banks have to report transactions of over Rs 2 lakh made via credit cards. This limit may be increased to Rs 5 lakh or more.
6. The finance ministry said, Currently, the telecom companies are levying an Unstructured Supplementary Service Data (USSD) charge of Rs. 1.50 per transaction for mobile banking/payments. To enhance adoption of mobile banking/payment, the USSD charges could be examined and rationalized."
The ministry has invited comments and suggestions on these draft guidelines and the deadline for the same is June 29, 2015, 5 pm.
