The government has proposed income tax benefits for individuals making payment through debit or credit cards. The move is aimed at curbing the flow of black money and discouraging cash transactions.
In a draft paper for moving towards cashless economy and reduce tax avoidance, the government also proposed to make it mandatory to settle high-value transactions of more than Rs 1 lakh through electronic mode.
In order to incentivise shopkeepers, it has proposed tax rebate to them provided they accept a significant value of sales through debit or credit cards.
The proposals are aimed at building a transactions history of an individual to enable improved credit access and financial inclusion, reduce tax avoidance and check counterfeiting of money.
If accepted, the Finance Ministry’s proposals would also mean no transaction charges on card payments at petrol pumps and gas agencies, and for railway tickets.
“Tax benefits in terms of income tax rebates to be considered to consumers for paying a certain proportion of their expenditure through electronic means,” the Finance Ministry’s proposal said. The proposals also mandate settling of high value transactions of more than Rs. 1 lakh by electronic means only.
Not just the consumers, the proposal also looks to extend benefits to merchants accepting electronic payments.
“Tax benefits could be provided 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 per cent value of the transactions is through electronic means. Alternatively, 1-2 per cent reduction in value added tax could be considered on all electronic transactions by the merchants,” the draft proposal says.
Finance Minister Arun Jaitley in his Budget speech had said that, “One way to curb the on flow of black money is to discourage transactions in cash.”
The Finance Ministry has invited comments on these draft proposals by June 29, 2015 on the government’s online platform mygov.in.
In a bid to make customer redressal more efficient the government also proposed new mechanisms in cases of fraud.
“In case of a fraudulent transaction, the money will be credited back to customer’s account and blocked and subsequently released after the investigation is complete/ limited to say a maximum of 3 months,” the proposals added.