Chennai: Continuing the government’s stride towards cash-less economy, the budget proposed to levy tax on cash withdrawals while rewarding electronic transactions.
In order to discourage the practice of making business payments in cash, budget proposes to levy TDS of two per cent on cash withdrawal exceeding Rs one crore in a year from a bank account, finance minister said.
The government also wants to discourage individuals from withdrawing cash. TDS will also be levied at the rate of two per cent on cash withdrawal by a person in excess of Rs one crore in a year from his bank account. Some business models, where large cash withdrawal is a necessity, are proposed to be exempted. Central Government may notify the persons to whom these provisions shall not be applicable in consultation with the Reserve Bank of India.
Encouraging electronic transactions, it promised that no charges or Merchant Discount Rate shall be imposed on customers as well as merchants if business establishments with annual turnover more than Rs 50 crore offer low cost digital modes of payment like BHIM UPI, UPI-QR Code, Aadhaar Pay, certain Debit cards, NEFT and RTGS to their customers.
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. Necessary amendments are being made in the Income Tax Act and the Payments and Settlement Systems Act, 2007 to give effect to these provisions. In order to promote other electronic modes of payment also budget proposed to amend provisions of this Act.
“We welcome the proposal of business establishments with annual turnover of more than Rs 50 crore to offer low cost digital modes of payment to their customers. No charges should be made applicable to the gem and jewellery sector businesses as well,” said Pramod Kumar Agrawal, Chairman, GJEPC.
Merchant charges have been one of the factors discouraging electronic payment for purchases.
