Now all that your wife spent on your credit card could well help claim tax benefits! Are you surprised? That is exactly what the Finance Ministry proposal has indicated.
In a move that is aimed at better financial inclusion, reducing instances of tax avoidance and currency fraud, the Govt is also looking at measures that would completely do away with any charges levied for card payment at gas agencies, petrol pumps and even railway bookings.
The draft paper that has been circulated by the finance ministry proposes providing tax relief to consumers for paying a certain amount of their expenses electronically. The proposal explains, “an appropriate tax rebate can be extended to a merchant if at least say 50% value of the transactions is through electronic means. Alternatively, 1-2% reduction in value added tax could be considered on all electronic transactions by the merchants.” Comments on the proposal are invited till June 29.
The government also proposes to make electronic transactions compulsory for all payments above Rs 1 lakh. The idea is to create sufficient transaction history for individuals as well as improve overall inclusion levels. The move is also aimed at taking constructive steps for tax avoidance. Not only on the consumer end but the proposal also includes long-term initiatives on the govt’s side to create appropriate acceptance channels. It proposes adoption of a national E-payment gateway ‘PayGov India.’
Just to remind our readers the proposal is in continuation of the Finance Ministry’s policies to encourage electronic transaction as outlined in 2015-1016 Budget speech in February. Arun Jaitley, India’s Finance Minister had mentioned that the Govt will “introduce soon several measures that will incentivise credit or debit card transactions and disincentivise cash transaction”.
The proposal also includes measures of redressal in case of fraudulent transactions, regulatory measures to curb malpractices and Aadhar based identification for effective tracking.
On the face of it this proposal gets a big thumbs up but the implementation phase might see significant bottlenecks which need to be handled effectively for a smooth run.