JOIN USGoing digital: No cash transaction above Rs 3L
In a major move to limit the use of cash in the economy and to promote more organised payments, Finance Minister Arun Jaitley proposed ban on cash payments above Rs 3 lakh.
Billing it as a major step to check corruption and tax evasion, Jaitley in his Budget speech said that the government has accepted a suggestion by the Special Investigation Team on Black Money in this regard.
Simultaneously, Jaitley said the government is considering the option of amending the Negotiable Instruments Act to ensure that the payees of dishonoured cheques are able to realise the payments.
In a bid to incentivise digital transactions, the finance minister proposed that the presumptive income tax for small and medium tax payers whose turnover is up to Rs 2 crore will be reduced from the present 8% of their turnover which is counted as presumptive income to 6% in respect of turnover which is received by non-cash means.
The finance minister also proposed to limit the cash expenditure allowable as deduction, both for revenue as well as capital expenditure, up to Rs 10,000. Similarly, the limit of cash donation which can be received by a Charitable Trust is being reduced from Rs 10,000 to Rs 2,000.
In a move to promote cashless transactions, the finance minister proposed to exempt levies and duties on miniaturised POS card reader for m-POS, micro ATM standards version 1.5.1, finger print readers/scanners and iris scanners.
He also proposed to exempt parts and components for manufacture of such devices, so as to encourage domestic manufacturing of these devices.
As for regulating the digital economy, the finance minister has proposed to create a Payments Regulatory Board in the Reserve Bank of India (RBI) by replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems.
The Committee on Digital Payments constituted by the Department of Economic Affairs has recommended structural reforms in the payment ecosystem, including amendments to the Payment and Settlement Systems Act, 2007.
As the Centre is keen to strengthen the digital payment infrastructure and grievance handling mechanisms, Jaitley said the focus would be on rural and semi-urban areas through post offices, fair price shops and banking correspondents.
He announced that steps would be taken to promote and possibly mandate petrol pumps, fertilizer depots, municipalities, block offices, road transport offices, universities, colleges, hospitals and other institutions to have facilities for digital payments, including BHIM app.
Jaitley held that BHIM will unleash the power of mobile phones for digital payments and Financial Inclusion. He also announced that Aadhaar Pay, a merchant version of Aadhaar Enabled Payment System, will be launched shortly.
This will be specifically beneficial for those who do not have debit cards, mobile wallets and mobile phones. A mission will be set up with a target of 2,500 crore digital transactions for 2017-18 through UPI, USSD, Aadhaar Pay, IMPS and debit cards.
Banks have targeted to introduce additional 10 lakh new PoS terminals by March 2017. They will be encouraged to introduce 20 lakh Aadhaar based POS by September 2017. A proposal to mandate all the government receipts through digital means, beyond a prescribed limit, is under consideration. The government will beef up the Financial Inclusion Fund to augment resources for taking up these initiatives.
Jaitley said the cashless system has a “transformative impact” in terms of “greater formalisation” of the economy, and mainstreaming of financial savings into the banking system. “This, in turn, is expected to energise private investment in the country through lower cost of credit. India is now on the cusp of a massive digital revolution.”