Govt proposes tax benefits for credit and debit card payment

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