23 June 2015

Pin It

In Depth Government to give tax benefits for E Transactions Card Payments

In Depth Government to give tax benefits for E Transactions Card Payments

Government to give tax benefits for E Transactions Card Payments

The Government on Monday proposed income tax benefits for people making payments through credit or debit cards

Read the Draft Proposals for Facilitating Electronic Transactions

1- Objectives –
Improve the ease of conducting transactions for an individual
Build a transactions history to enable improved credit access and financial
Reduce the risks and costs of carrying cash at the individual level.
Reduce costs of managing cash in the economy.
Reduce tax avoidance
Reduce the impact of counterfeit money.


Provide access to financial services to every citizen along with ability to
Conduct non cash transactions

Electronification of Government Collections by equipping each collection
Desk with a method to accept non cash receipts

Migrate payment transactions from cash dominated to non-cash through
Incentivization of electronic and disincentivization of cash based transactions

Enhance acceptance infrastructure in the country to promote
Electronification of transactions

Encourage Government, Corporates, Institutions and merchant
Establishments to facilitate non cash payments

3- Definition

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.  These accounts could be held in banks, or with prepaid instrument providers.

These transfers could be done through means of cards (debit / credit), mobile wallets, mobile apps, net banking, Electronic Clearing Service (ECS), National Electronic Fund Transfer (NEFT), Immediate Payment Service (IMPS), or other similar means

4. Goal

The goal of the proposed policy is to provide the necessary incentives to use E transactions to replace the use of cash - either in government transactions, or in regular commerce over a period of time through policy intervention.

5 - Way Forward

The  draft  proposals  detailed  in  this  section,  have  been  prepared  after  due deliberations and consultations with various stakeholders which includes RBI, NPCI, NIBM, public and private sector banks, card service providers, mobile service providers, research institutions, organizations working in this area and various government departments.

5.1 - Enabling policy for E-transactions in Government Collections

At present, Government Departments/Central Public Sector
Undertakings/Organizations levy a convenience fee/service
Charge/surcharge for making E-transactions (card payments) to essential
Commodities, utility service providers, petrol pumps, gas agencies, railway
Ticket counter/IRCTC etc. The feasibility of removing the charges will be

Utility service providers could be advised to give a discount to users for
Small ticket payments through E-payments, on the lines of BSNL, which
Provides an incentive of 1 per cent of the billed amount if the payment is
Done through electronic mode.

Government Departments to introduce appropriate acceptance
Infrastructure or adopt national E-payment gateway ‘PayGov India’ for
Collection of revenue, fee, penalties etc.

5.2   - Measures to promote wider adoption of E-transactions

At present, there is a Merchant Discount Rate (MDR) of 0.75% on Debit
Card transactions up to 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 existing inter-change fee on Debit/Credit Card transactions are not
Uniform and need to be standardized/rationalized to encourage both
Issuing and acquiring banks to establish and utilize acceptance

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.

Tax benefits in terms of income tax rebates to be considered to consumers
for  paying  a  certain  proportion  of  their  expenditure  through  electronic

The authentication requirements for different classes of transactions could
Be re-examined based on the risk profile and safety requirements.
Consider a levy of a nominal cash handling charge on transactions greater
Than a specified level.

Mandating settling of high value transactions of, say, more than Rs. 1 lakh,
Only by electronic means.

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 lakhs
In a year. To facilitate high value transactions, the ceiling of Rs. 2 lakhs
Could be increased to say Rs. 5 lakhs or more.

5.3   -Creating enabling environment / acceptance infrastructure

It has been observed that acceptance infrastructure, particularly Point of
Sale (PoS) / Mobile PoS terminals as a percentage of the total number of
Debit/Credit Cards is very low. Therefore, mandating banks issuing cards
To deploy POS terminals in a prescribed ratio could be considered.
Like in ATMs, non-banks could be authorized to install white label POS
Improve broad band connectivity to enable mobile based payments on a
Wider scale.

5.4 - Encouraging mobile banking/payments channels

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.
Appropriate changes in the regulatory structure, if required, to promote
Mobile based payment systems.

5.5 - Awareness and grievance redressal

Assurance mechanisms for fraudulent transactions to be created wherein,
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.

6.  - Other Issues

While the Payments and Settlement Systems (PSS) Act, 2007 governs this
Area, changes in the regulatory mechanisms could be examined to ensure that innovations in the payments ecosystem continue to happen. The linkages with Aadhaar based identification for authentication could also be strengthened.

The government has placed the draft proposals for facilitating electronic transactions and sought comments and views from the public up to June 29.

Below are the Comments and Suggestion by SM
Government should ban the 1000 Rupee notes first and after 2 or 3 years should ban the 500 Rupee notes, thus it will make it mandatory for the people to use cards, to do electronic transactions

If government does not ban the notes of 1000 and 500 then nothing is going to change in India regarding Black Money

Lower class, middle class Indians have already started to use the bank cards, net banking etc as it saves the time. it saves petrol

Do away with transaction charges which are charged by the companies when payment is made by the Credit or Debit Card.

Make it compulsory for all the companies to accept online payments if someone wants to pay online, must provide option to pay online
Example – Insurance Companies ,School Fees,College Fess

Reality views by sm –

Tuesday, June 23, 2015

Tags – Credit Debit Card Payment Tax Benefit


Renu June 24, 2015  

it will be so convenient if all this is implemented.

Destination Infinity June 24, 2015  

This is a good move. I hope it will be implemented soon. Might discourage black money circulation and bring more accountability.

Destination Infinity