New Delhi, Feb 1 (IANS) In bid to boost the digital economy, Finance Minister Arun Jaitley in the Union Budget 2017-18 reduced limits of cash transactions and announced 100 per cent penalty on breaches while proposing incentives to promote the non-cash transactions.
"On the recommendation of the Special Investigation Team (SIT) on Black Money, the government had decided not to allow cash transactions above Rs 3 lakh," Jaitley said in his Budget speech.
Any individual or firm which pays anyone over this amount will have to pay a 100 per cent penalty of the amount which exceeds this limit.
Jaitley also proposed to limit the cash expenditure allowable as deduction, both for revenue as well as capital expenditure, to Rs 10,000.
Similarly, the limit of cash donation which can be received by a charitable trust was reduced from Rs 10,000 to Rs 2,000.
Announcing a scheme of presumptive income tax for traders whose turnover is up to Rs 2 crore, the budget also proposed to make the presumptive income tax for small and medium tax payers from the current 8 per cent to 6 per cent in respect of turnover which is received by non-cash means. This benefit will be applicable for transactions undertaken in the current year also, Jaitley said.
To promote cashless transactions, the Budget proposed to exempt miniaturised POS (point of sale) card reader for m-POS, micro ATM, finger print scanners and iris scanners.
Simultaneously, it was proposed to exempt parts and components for manufacture of such devices, so as to encourage domestic manufacturing of these devices.
Chief Economic Advisor Arvind Subramanian on Tuesday had said that the transition to digitalisation should be based on incentives and not forced upon people.
In the Budget speech, Jaitley said that India is on the cusp of a massive digital revolution, which will help in greater formalisation of the economy, and is "an integral part of government's strategy to clean the system and weed out corruption and black money".
He further said that that digital payments would bring benefits for the common man and financial inclusion and JAM (Jan Dhan Yojana, Aadhaar and Mobile number) trinity were precursors to this current push.
The BHIM app that has already been launched will unleash the power of mobile phones for digital payments and financial inclusion, he said, adding 125 lakh people have adopted it so far.
Aadhar Pay, a merchant version of Aadhar 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.
Banks would also be encouraged to introduce additional 10 lakh new PoS terminals by March 2017 and 20 lakh Aadhar based PoS by September 2017, he said.
A proposal to mandate all government receipts through digital means, beyond a prescribed limit, is under consideration, Jaitley said.
The Ratan Watal Committee on digital transactions recommended creation of a Payments Regulatory Board in the Reserve Bank of India by replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems.
"Necessary amendments are proposed to this effect in the Finance Bill 2017," he said.
Pankaj Patel, President, Federation of Indian Chambers of Commerce and Industry lauded the government's announcements in the Budget to incentivise "going digital".
"Continuing with its efforts to incentivise 'going digital' the government made some more announcements in the budget. While these were on expected lines, the setting up of a specialised Payments Regulatory Board within the Reserve Bank of India should bring into greater focus the important issue of inter-operability," Patel said.
Vijay Shekhar Sharma, Founder and CEO, Paytm said: "It is a digital economy budget. Government has pushed the digital theme in every area of the budget. Every person from a small shops to consumers are pushed towards the digital economy. Tax benefits, incentives to use digital payments and extending loans based on a digital footprint will create a larger merchant ecosystem for digital payments."
Rana Kapoor, MD and CEO, YES Bank, said: "The commitment to a less-cash economy has got a significant leg-up through bold measures such as a cap on cash transactions and initiatives to spur digital payments in the economy."