Friday, June 14News That Matters

Government proposes income tax benefits for debit/credit card payments


Government has come out with the proposal to provide income tax benefits for payments made through debit or credit cards. This will encourage electronic transactions and reduce the black money transactions.

Government is also proposing

  • No Transaction charges on card payments at petrol pumps, gas agencies and railway tickets
  • mandatory for all transactions above Rs 1 lakh to only be conducted electronically.

Encouraging shopkeepers РThe government is also looking at encouraging shopkeepers and traders to accept electronic payments rather than cash. The draft said that appropriate tax rebate can be extended to a merchant if at least say 50% value of the transaction is through electronic means. Alternatively, 1-2% reduction in value added tax could be considered on all electronic transactions by merchants.

Discount on Utility Bills – Utility service providers such as electricity companies and telecom operators could offer a discount if subscribers paid their bills electronically, similar to state-owned BSNL that provides an incentive of 1% of the billed amount on electronic payments.

Cash handling charge – The government is also considering a levy of a nominal cash-handling charge on transactions greater than a specified level, implying that cash payment beyond a certain threshold may attract a transaction fee.

Credit card reporting threshold change – Currently, 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. The ceiling could be raised to Rs 5 lakh or more.

Any payment made through debit/credit cards, mobile wallets, apps, net banking, electronic clearing service, National Electronic Fund Transfer and immediate payment service (IMPS) will be classified as electronic transactions.

Comments on the draft can be sent in till June 29.

Please share on views on this draft. Do you think it is a good move ?

Leave a Reply

Your email address will not be published. Required fields are marked *