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Budget 2019: India Takes Big Step to Boost Digital Payments

Know-how companies on Friday welcomed the transfer to levy two % tax deduction at supply (TDS) on money withdrawal exceeding Rs. 1 crore in a 12 months from a checking account, whereas small companies warned it could have an opposed affect on the economic system. Delivering her maiden price range speech on Friday, Finance Minister Nirmala Sitharaman mentioned the proposal to levy two % TDS was aimed toward discouraging the observe of constructing enterprise funds in money.

“This move will discourage spending which will be a big blow to the economy. There are both pros and cons of a digital payments ecosystem. India is not fully equipped to leverage this system,” mentioned New Delhi-based businessman Ajit Khosla who offers in cash switch, travelling and remittance enterprise.

“For example, while customer liability is limited in case of fraudulent electronic transactions, we do not immediately get the refund. This could be a huge problem for those with limited capital, especially when one is forced to do business only through digital payments,” he mentioned.

Khosla mentioned that he’s presently required to withdraw about Rs. 2 crores a 12 months and makes use of monetary providers corresponding to Western Union and MoneyGram.

“We get 0.4 percent commission from Western Union but with this new tax we will incur huge loss as customers often demand money in cash,” Khosla mentioned.

Naresh Kumar, proprietor of Falcon Cargo Movers in Paharganj, New Delhi agreed with Khosla.

“We send around 500 packets every day and in doing so we need to incur a lot of cost in cash — transportation, labour charge and everyday expenses. As we cannot avoid cash payments, the new tax will hit us hard,” Kumar mentioned.

Tech companies, nonetheless, consider that the transfer will increase digital funds in the entire provide chain.

“It is encouraging that the government is continuing with its policy to promote digital payments in India. The two percent TDS on cash withdrawal of more than Rs. 1 crore a year will encourage the widespread adoption of digital payments,” a Paytm spokesperson mentioned.

Ever since Prime Minister Narendra Modi launched the Digital India mission on July 1, 2015, the nation has seen an enormous development in digital funds.

The entire variety of digital cost transactions hit 332.34 crores in March 2019, from simply 79.67 crores in October 2016.

There are presently a number of low-cost digital modes of cost corresponding to BHIM UPI, UPI-QR Code, Aadhaar Pay, sure Debit playing cards, NEFT, RTGS and many others. which can be utilized to advertise a much less money economic system.

“Under the Pradhan Mantri Gramin Digital Saksharta Abhiyan, over two crore rural Indians have so far been made digitally literate. To bridge rural-urban digital divide, Bharat-Net is targeting Internet connectivity in local bodies in every Panchayat in the country. This will be speeded up with assistance from Universal Service Obligation Fund and under a Public Private Partnership arrangement,” Sitharaman mentioned throughout her speech on Friday.

The Finance Minister additionally proposed that enterprise institutions with an annual turnover of greater than Rs. 50 crores shall provide low price digital modes of cost to their prospects and no fees or Service provider Low cost Price (MDR) shall be imposed on prospects in addition to retailers.

“RBI and banks will absorb these costs from the savings that will accrue to them on account of handling less cash as people move to these digital modes of payment,” Sitharaman mentioned.

“Necessary amendments are being made in the Income Tax Act and the Payments and Settlement Systems Act, 2007 to give effect to these provisions,” she added.

“I believe this will discourage businesses from making cash transactions and encourage them to make payments through digital channels,” mentioned Harshil Mathur, CEO and Co-Founder, Razorpay.


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