Home / Politics / Policy /  Prepaid instrument providers approach tax authority on new PAN rule

New Delhi: Unhappy with the new rule applied on cash cards and prepaid instruments, the Payments Council of India (PCI), a body formed under the Internet and Mobile Association of India, on Thursday approached the Central Board of Direct Taxes to present the industry view.

Starting 1 January, users of prepaid instruments such as wallets require to provide their Permanent Account Number (PAN) if the total cash uploading in a year exceeds 50,000. The industry views this as a discrimination compared with rules for, say, a bank account which requires PAN to be quoted only if a cash deposit is above 50,000.

“This is quite a restrictive rule," said Bipin Preet Singh, founder and chief executive officer, MobiKwik, a mobile wallet company.

The first recommendation made by the industry is that the limit be increased to 2 lakh a month and 50,000 per transaction, the same as that applicable to bank account deposits. The second recommendation made by the industry is that the rule should not be applicable from 1 January and should instead kick in on 1 April.

Members of PCI include financial services providers including wallet companies.

The tax department has imposed the rule to curb black money in the system after reports that mobile wallets were being used as carriers of unaccounted money. “There were some reported issues which have come up wherein it has been claimed that people were uploading black money on wallets," acknowledged Nitin Misra, vice-president-products, Paytm.

Experts say that the restrictions are regressive. “If the goal of the government is to move cash to digital, the limit has to be reasonably higher than 50,000 a year," said Shinjini Kumar, leader-banking and capital markets, PricewaterhouseCoopers India.

She says that the current limit excludes most of the population from using wallets as only around 170 million people out of the total population of 1.27 billion in the country have PAN cards.

“The industry should be given a little elbow room," Kumar said. According to her, the limit could kill the wallets as 50,000 a year is too low an amount to even pay for utility bills for a year.

Misra supports the move. “I believe it is a good move. By bringing wallets under the ambit of regulation, it is a sort of validation and recognition of the product that it belongs to the mainstream," he said.

He added that it is a good step to curb black money, which is indeed a problem with the use of mobile wallets.

Paytm has been given in-principle approval by the Reserve Bank of India to set up a payments bank.

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