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Govt proposes tax benefits for credit and debit card payment

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Proposals:

  • To provide income tax benefits for people making payments through credit or debit cards
  • Doing away with transaction charges on purchase of petrol, gas and rail tickets with plastic money
  • Mandatory to settle high-value transactions of more than Rs 1 lakh through electronic mode
  • Tax rebates to shopkeepers to incentivize them to accept a significant value of sales through debit or credit cards

Benefits:

  • First step towards becoming a cashless economy, which has many benefits
  • Digital money gives the government better data about the currency levels in the economy, which helps in framing economic and monetary policies with more confidence
  • It also reduces tax-avoidance as every transaction will be on record. This reduces the black money problem
  • It also aims to build a transactions history of an individual to enable improved credit access and financial inclusion
  • Reduces fake notes menace. Reduces the cost of currency printing, storage and physical transfer.

Challenges:

  • Majority of people in India do not have debit and credit cards
  • This can be viewed by some as giving incentives to rich and middle classes who have debit or credit cards
  • As internet access is low and internet costs are high in many parts of the country, it is difficult for shopkeepers to operate ecash-transfer machines
  • Some might even argue that access to credit cards will push people towards materialistic life