The government has proposed income tax benefits for individuals making payment through debit or credit cards. The move is aimed at encouraging non-cash transactions and curbing the flow of black money. The Finance Ministry has invited comments on these draft proposals by June 29, 2015, on the government's online platform mygov.in.
Here's a 10-point cheat-sheet:
1) The government is considering income tax rebates for consumers who pay a certain proportion of their expenditure through electronic transactions.
2) There could also be no transaction charges on card payments at petrol pumps, gas agencies, and for railway tickets.
3) High value transactions of more than Rs 1 lakh may be allowed through electronic means only.
4) To encourage electronic transactions, the government also proposed new redressal 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 proposal said.
5) It is estimated that less than 10 per cent of value of transactions in India are made electronically.
6) Not just the consumers, the proposal also looks to extend benefits to merchants accepting electronic payments. " 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 said.
7) Utility service providers like electricity companies and telecom operators could give a discount to users for payments made electronically, similar to BSNL, which provides an incentive of 1 per cent of the billed amount if the payment is done through electronic mode.
8) The government is also considering a levy of a nominal cash handling charge on transactions greater than a specified level. This means that beyond a certain amount if customers pay by cash they could be asked to pay a transaction fee.
9) At present, banks have to report the aggregate of all the payments made by a credit cardholder as one transaction, if such an amount is Rs 2 lakh in a year. To facilitate high value transactions, the ceiling of Rs 2 lakh could be increased to Rs 5 lakh or more.
10) The Finance Ministry has prepared the draft proposals after consultations with various stakeholders including RBI, public and private sector banks, card service providers, mobile service providers, and research institutions.