The government, in one of its first large-scale attempts to escort a cashless revolution, has announced lofty incentives for businesses engaged in digital payments.
The government, in one of its first large-scale attempts to escort a cashless revolution, has announced lofty incentives for businesses engaged in digital payments. Although cashless payments aren’t new, this phase after the recent demonetisation beckons a defining moment in the Indian economy. Our country’s citizens – consumers of a cash-dependent lifestyle – have to transition to a ‘less cash’ one sooner or later. With a limited choice, it’s hard to overlook this digital mode and how fast it has changed the dynamics of trade lately.
Recently, the government implemented various measures to offer significant discounts on digital payments for the purchase of insurance policies, fuel and railway tickets. 10 percent and 8 percent discounts are being offered for buying general and life insurance. Incentives extend to service charge waiver for train ticket bookings through IRCTC as well. In addition, digital payments for railway catering, accommodation, retiring room help avail a discount of 5%.
In an attempt to help consumers and merchants migrate to digital payments, the government introduced two schemes offering cash rewards–Lucky Grahak Yojana and the Digi-Dhan Vyapari Yojana. Furthermore, the government has also waived off service tax for payments of up to Rs. 2,000 made through cards.
Determined to influence fuel payments, the government is targeting 70% of the daily sales transactions through cards or wallets, and thereby reduce cash exchange by Rs 2 lakh crore per annum. Furthermore, an incentive of 0.75% could be availed at central government petroleum PSUs. The Assam government took the incentive policy a step forward by implementing an additional incentive of 0.75% on digital payments for diesel and petrol.
The government’s ordinance on digital transactions is rather lavish in tax savings. This opens the door to grand monetary benefits for employees. And, it is an opportune time for traditional businesses and corporates to embrace a cashless pay-out policy.
We have studied the ins and outs of tax benefits programmes in detail and understand how substantial a saving could be with appropriate solutions. Many components of a salary make room for tax exemption. With more than adequate support from the government, today, working professionals and the business community alike can harvest a fortune-like saving through smart benefits.
Most often, our limited understanding of legal mandates impedes us from exploring and adopting innovative tax benefits solutions. Various allowances for employees could potentially lead to Rs. 80,000 in overall tax savings–a momentous figure for any individual. With digitisation, employees could access all these tax benefits through new-age apps. Over time, this could accrue to lakhs in total savings.
Reaching a breakthrough in this regard would require us to pass through the maze of legal provisions and inefficient processes–yet realize a significant tax saving. Payment solution providers must fulfil all Income Tax Act and RBI norms’ requirements, which involve extensive planning and paperwork. A little lapse or an ignored legal clause could severely impact financial transactions and injure a brand name.
As our country makes digital strides and progresses to a technologically-mature era, it is only fitting to complement this culture with cutting-edge digital products and solutions. Since the citizens of our country have already begun to embrace apps and technology for their routine needs, the transition to more substantial, digitised tax benefits solutions would happen in the twinkling of an eye.
However, we need the support of corporate India to help initiate and catalyze this digital transformation. This involves a radical change in the way we plan and manage payroll policy. A strong-willed mindset that puts tax benefits measures right in the centre of employee-focused programmes is expedient.
We have seen the birth of various tax benefits solutions in the Indian market, and we can expect many more such innovations in the near future. To fast track the adoption of smart benefits, an organisation’s main effort would be to identify avant-garde programmes that provide monetary benefits to employees. Through mobile apps, a wallet or a digital card, employers could transfer grants, offer incentives and manage reimbursements faster.
Positioned strongly within the allowance space, meal vouchers, one of the most resourceful and favourable tax-saving instruments, could offer Rs. 12,000 in tax savings. Currently, most employees have to rely on paper coupons to pay for meals, which is cumbersome. Employers too have to complete exhaustive paperwork in order to distribute meal cards. All this could change with digitized meal vouchers.
Similarly, medical, and fuel and travel reimbursements solutions could help employees save up to Rs. 4,500 and Rs. 8,600 in taxes per annum respectively. Equally important are the monetary benefits associated with asset/gadget and gift cards. Moreover, reimbursement solutions could not only help save taxes, but also help HR managers transfer grants digitally to employees with little paperwork and enable instant, inclusive, hassle-free reimbursements for all employees across offices.
With a plethora of options that spell extravagant benefits, it’s only a matter of time before smart benefits solutions become a prominent tax-saving tool adopted by corporates and entrepreneurs. We echo the government’s stance on rapid digitisation, and are confident in hope to work with the system and invite the era of the cashless economy.
(The author is CEO and Co-Founder of M-commerce company Zeta)