Govt plans tax sops on card payments

Seeking to curb the black money menace by checking cash transactions, the government on Monday proposed tax benefits to people making payments through credit or debit cards and sought to enhance mobile banking.

In a discussion paper brought out in the public domain, the government also proposed to do away with transaction fees on purchase of petrol, gas and railway ticket through credit or debit cards.

At present, a convenience fee/service charge/surcharge is levied for making e-transactions (card payments) to essential commodities, utility service providers, petrol pumps, gas agencies or railway ticket.

“The feasibility of removing the charges will be examined,” the draft proposal said and invited comments till June 29.

To enhance adoption of mobile banking/payment, it proposed to rationalise the service data charge. At present, telecom companies levy Rs 1.50 per transaction for mobile banking/payments. Instead, it proposed to advise service providers to give a discount to users for small ticket payments through e-payments on the lines of the BSNL, which provides an incentive of 1 per cent of the billed amount if the payment is done through electronic mode.

Tax benefits may be given to merchants for accepting electronic payments. For example, an appropriate tax rebate can be extended to a merchant if at least, say, 50 per cent value of transactions is through electronic means.

Besides, it proposed to make it mandatory to settle high value transactions of more than Rs 1 lakh through electronic mode. To promote wider adoption of e-transactions, it proposed rationalisation of the Merchant Discount Rate (MDR), which at present is 0.75 per cent on Debit Card transactions of up to Rs 2,000 and 1 per cent on all transactions above it.

“The existing inter-change fee on Debit/Credit Card transactions are not uniform and need to be standardised/rationalised to encourage both issuing and acquiring banks to establish and utilise acceptance infrastructure,” the draft said.

It also proposed to relax rules for reporting credit card transactions of individuals by banks. “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, say, Rs 5 lakh or more,” it said.

It said government departments should consider introduction of appropriate acceptance infrastructure or adopt national e-payment gateway “PayGov India” for collection of revenue, fee and penalties.

The proposal follows this year’s budget announcement aimed at curbing the black money menace. “One way to curb the flow of black money is to discourage transactions in cash. Now that a majority of Indians have or can have, a Rupay debit card, I propose to introduce soon several measures that will incentivise credit or debit card transactions and disincentivise cash transactions,” Finance Minister Arun Jaitley had said in his budget speech.

The aim of the proposed policy is to provide necessary incentives to replace cash use, either in government transactions or in regular commerce over a period of time. It also aims at reducing tax avoidance and the impact of counterfeit money.