Budget 2019: Govt gives incentives to push the country ahead on digital road1 min read . Updated: 06 Jul 2019, 12:43 AM IST
- Govt proposes to levy TDS of 2% on cash withdrawal exceeding ₹1 crore in a year from a bank or post office account
- Nirmala Sitharaman says customers or merchants won’t be charged any fee or merchant discount rate for digital transactions
Budget 2019 made it clear that the Narendra Modi-led government is serious about encouraging the digital economy. It announced a penalty for use of cash beyond a limit, while introducing multiple incentives for cashless transactions.
To discourage the practice of making payments in cash, the government has proposed to levy tax deducted at source (TDS) of 2% on cash withdrawal exceeding ₹1 crore in a year from a bank or post office account. This will not be applicable to payments made by banks or post offices to the government, banks, banking correspondents or post offices, according to the Finance Bill.
Also, business establishments with annual turnover of more than ₹50 crore will need to offer low-cost digital modes of payment such as BHIM UPI, UPI, Aadhaar Pay, debit cards, NEFT and RTGS to customers. Finance minister Nirmala Sitharaman said customers or merchants won’t be charged any fee or merchant discount rate (MDR) for these transactions. “RBI and banks will absorb the costs from the savings that will accrue to them on account of handling less cash as people move to digital modes of payment," she said.
According to data from the Reserve Bank of India (RBI) and the National Payments Corp. of India, digital transaction volume through various modes has gone up from 796.7 million in October 2016 to 3,323.4 million in March 2019. In the same period, the value of transactions went up from ₹108 trillion to ₹258 trillion.
Dewang Neralla, CEO, Atom Technologies, a payment gateway, said the budget has set a strong tone for incentivizing digital payments. “Implementation of low-cost payment modes for businesses will definitely drive QR codes and low-cost options across organized retail and larger enterprises. But announcement of no MDR for customers and merchants would require clarity," he said.
Focus on digital transactions is not new. The ministry of electronics and IT recently launched a scheme, wherein the government will reimburse MDR charges on transactions up to ₹2,000 made through digital modes. RBI also issued a circular recently to waive charges on NEFT and RTGS transactions from 1 July.