The government has proposed a tax benefit if you are making certain payments with your credit or debit cards. This move is to curb black money and to discourage transactions in cash.
However, the proposals are only at the draft stage and are being placed here to obtain the public opinion and, do not imply any commitment from the government.
Now let us see few important points to know if the proposal is accepted.
1. There can be possibility of reduction in the Merchant Discount Rate (MDR) and the rationalization of the distribution of the MDR across different stakeholders will be considered.
2. As of now, inter-change fee on Debit/Credit Card transactions are not uniform and need to be standardized/rationalized to encourage both issuing and acquiring banks to establish and utilize acceptance infrastructure.
3. Tax benefits in terms of income tax rebates to be considered to consumers for paying a certain proportion of their expenditure through electronic means.
4. Tax benefits could be provided to merchants for accepting electronic payments on sales per centage. Alternatively, 1-2% per cent reduction in value added tax could be considered on all electronic transactions by the merchants.
5. The authentication process for different classes of transactions could be re-examined based on the risk profile and safety requirements.
6. Mandatory card payment or electronic payments for high value transactions of, say, more than Rs. 1 lakh
7. The porposed draft said that, assurance mechanisms for fraudulent transactions will be created wherein, in case of a fraudulent transaction, the money will be credited back to customer's account and blocked and subsequently released after the investigation is complete/ limited to say a maximum of 3 months.
8. To enhance adoption of mobile banking/payment, the Unstructured Supplementary Service Data (USSD) charges could be examined and rationalized.
9. mandating banks issuing cards to deploy POS terminals in a prescribed ratio could be considered.
10. Like in ATMs, non-banks could be authorized to install white label POS terminals.