Budget 2017: Digitalization, is the integration of digital technologies into everyday life.
By Amarpal Chadha, Tax Partner and India Mobility Leader, EY India
It wasn’t so long ago that we started hearing about ‘go green’ campaigns and observed the impact of it on the environment. Something analogous came to our lives known as “Digitalization” creating enormous impact on industries and our daily living. Digitalization, is the integration of digital technologies into everyday life. It’s the use of digital technologies by several players in the market to create new opportunities for business and living.
Forbes believes, Prime Minister’s real motivation is a desire to leapfrog the cash generation to digital payment solutions—-a significant step in the development of India and the emergence of a truly cashless economy.
As the day of Union budget 2017 is arriving, expectation from public and industries have started coming in.
The below proposals could be taken in the budget to promote cashless economy:
Incentive to people and economic growth: Government has already introduced waiver of service tax on debit and credit card transactions of up to Rs 2,000 in a proposition to promote digital transactions during cash crunch. Successively, 0.75% discount has been announced for digital payments at petrol stations.
In continuation of the same, government may introduce similar incentives schemes if an individual makes payment of school/college fees, hospitalization, utility bills, etc.
Government has decided to deploy 2 Point of Sales (POS) devices each in 1 lakh villages with population of less than 10,000. These POS machines are intended to be deployed at primary cooperative societies/milk societies/agricultural input dealers to facilitate agri-related transactions through digital means. This would increase the rural India’s accessibility to the digital world.
Synchronization of existing savings scheme: Indians especially the senior citizens, have a tradition of keeping cash as emergency funds. Government could consider giving higher deduction for investment under section 80C of the Income Tax Act, 1961 for senior citizens which would encourage them to start investing cash into different savings schemes. Also, the withdrawal norms need to be simplified so that such investments can be quickly liquidated on need basis.
Payment using Unified Payment Interface (UPI) Apps could be convenient and promote cashless economy: UPI apps to transfer money, make payments or online shopping are becoming popular. It could be proposed in the budget that if an individual uses UPI apps for making transactions they would get cashback in their account ranging from .5% to 1%. This would encourage people to opt this mode for making payments.
Cashless economy could promote investment in real estate sector: When an individual purchases immovable property and fulfils the purchase consideration, he/she is liable to withhold taxes at source @1% in case the purchase consideration is greater than Rs 50 lakhs.
It could be proposed in the budget that upon digital payment for the purchase of property, the rate at which the taxes would be deducted at source could be reduced to 0.5 %. This would be a good medium to promote cashless economy and there would be a gradual growth in real estate sector.
Incentives for booking travel tickets online: Government has already provided incentives by way of discount upto 0.5 per cent to customers for monthly or seasonal tickets from January 1, 2017, if payment is made through digital means. Similar schemes could be launched for normal railway tickets. However, checks need to be put in place for preventing misuse of this scheme.
Contribution to an eco-friendly Nation: Last but not the least, if we use digital mode of payment for our livelihood, there would be less need to print paper currency which would result in sustaining trees, decrease global warming and thus contributing towards greener environment
The bigger question is, how do we move towards a cashless society?
Surely, it is challenging. We need to make the digital world more secure and simple, and people must be educated on the benefits of the digital world. Corporates could also be encouraged for earmarking CSR funds especially for organizing education camps in rural and semi-urban areas for spreading awareness about digitalization.
The concern regarding security of data in cashless transactions, which is the biggest challenge needs to be addressed by developing and implementing new technologies and security protocols. This will not happen in a day, we need patience and belief in the system and do the best we can.
So all the best to the Government.
(Shanmuga Prasad, senior tax professional, EY also contributed to the article. Views expressed here are their personal)