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The Electronic Transactions Proposal and its Implications

The Indian government has issued a proposal to incentivize electronic payments aimed at reducing risks and costs of carrying cash and managing cash in the economy, reducing tax avoidance and the impact of fake money. Once the proposal comes to effect, it will have the following implications:

what-you-need-to-know-about-credit-card-fees-11Cash payments will become expensive

To disincentivize cash transactions the government might impose a nominal cash handling charge on transactions greater than a specified limit.

Discounts/Rebates on utility bills

Currently, BSNL offers a 1% discount on the billed amount if the transaction is made electronically. Ones the electronic payment proposal is implemented, you can expect similar discounts to be extended by other service providers for making electronic bill payments.

Income-tax rebate for e-payment

This is perhaps the most interesting part of the proposal. The government suggests to give tax benefits in the form of income-tax rebates if an individual has made a certain proportion of their expenses through electronic mode.

posE-payments to be made mandatory for high-value transactions

As of now, it is mandatory to provide details of permanent account number (PAN), if an individual deposits ₹ 50,000 or more in cash at a bank. With the enforcement of this proposal, it will become mandatory to make all high value transactions (above a specified amount), only by electronic medium.

Stringent actions on fraudulent transactions

The government has proposed that the money be immediately credited back to the customer’s account, in case of fraudulent transactions. The money will be released only after an investigation has been carried out and completed. The maximum timeframe for this investigation will be three months.

Increase in the number of PoS machines

At present, the percentage of points of sale (PoS) terminals compared to the total number of issued debit and credit cards is extremely poor. For increasing electronic payments, widening the number of PoS terminals is a prerequisite. To build a robust infrastructure which can support high volume electronic transactions, the government has proposed to make it mandatory for banks issuing cards to deploy PoS terminals in a certain ratio. Additionally, just like white label ATMs, the government is also mulling to allow ‘white label POS terminals’.

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