New Delhi: In a bid to discourage cash transactions, the Budget proposed a 2 per cent tax deduction at source (TDS) on cash transactions of more than Rs 1 crore from a single bank account in a financial year.
The move is aimed to encourage digital transactions as Finance Minister Nirmala Sitharaman suggested using online payment methods like BHIM, UPI, RTGS and NEFT. While presenting her first Budget on Friday, Sitharaman said, “Business establishments with an annual turnover of Rs 50 crore would have to provide digital payment modes to customers at no extra charges or merchant discounts, on either customers or merchants.”
“The Reserve Bank of India (RBI) and government will cover the costs from savings accrued via a decrease in cash transaction operations,” she added.
Digital payments using mobile applications like Paytm, Google Pay, PhonePe and MobiKwik have already seen a rise in the past year as UPI transactions for June 2019 stood at 754 million, while IMPS and NETC transactions stood at 171 million and 26 million, respectively.
Although online payments have been on a rise, digital payment companies had long been demanding further tax incentives to promote a cashless economy. Last month, a committee appointed by RBI to encourage online payments, had suggested moves like elimination of charges and 24-hour RTGS and NEFT facilities. The committee also recommended the removal of convenience fee on payments made to government agencies.
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