Promoting Non-Cash Transactions

Promoting Non-Cash Transactions

Preface

Many of us must have seen in today’s newspapers that Government of India wants to promote e-transactions and as a part of this move, it wants to incentivise merchant outlets that enable their customers to use debit/credit cards to settle their bills.  So, the transaction charges in such cases will be reduced/waived.  Even the card users may get some tax benefits, but its details are yet to be chalked out.  So, going a step further, I wish to make the following suggestions to eliminate/minimise cash transactions in the country.  If it is done, it will check tax evasion, result in generation of greater revenue for the government, more accurate statistics with regard to GDP, national income and other economic parameters to aid more effective decision making at the highest level.

More than anything these, when cash transactions are minimised and non-cash transactions are promoted to the hilt, generation of black money within the country will drastically come down.

Encourage Bank Transactions

1. All transfer entries involving branches of the same bank must be made free, regardless of the location of the transferring branch and receiving branch.
2. All inter-bank transactions routed through clearing must be made free.
3. All NEFT/RTGS transactions up to Rs.5 lakhs are also not to be charged. Beyond this amount, a nominal amount of Rs.50 per transaction may be charged.
4. Internet Banking and Mobile Banking will continue to be free from any charges.
5. However, people who misuse the banking channels may be penalised. The definition of what constitutes ‘misuse’ must be made clear by RBI and guidelines issued by RBI in that respect will apply uniformly to all banks in India.

Incentivise E-transactions

1. To facilitate POS transactions done through Debit/Credit Cards, all merchant outlets having a proven sales turnover of Rs.20 lakhs and above per year, will be provided with an EDC machine by their banker at a nominal rent of Rs.100 per month.  This rent will be waived, if the value of transactions done through EDC machine exceeds Rs.1 lakh in a month or Rs.10 lakhs in a year.
2. No service charges whatsoever in the form of bank charges, service tax, surcharge etc. shall be levied on petrol/diesel bought with debit/card, travel tickets booked, taxes, statutory dues and utility bills paid through internet banking or online payment made with debit/credit card.
3. Similarly, online purchases of any genuine goods and services will be exempted from tax at the hands of the consumer. However, for this purpose, an intra-day limit of Rs.50,000 will be fixed, for each person.  (Rationale behind this is to bring the sales turnover and income of the seller under the scope/purview of income tax/sales tax).
4. For Gas Refills (cylinders) booked through internet, a consumer can make direct payment to the oil marketing company concerned.  In such cases, where the payment is made through internet banking or with a debit/credit card, cylinders may be billed at the subsidised rates only.  This will obviate the need for crediting the subsidy amount subsequently to the consumer’s bank account.
5. For payments/settlements made through Mobile Banking, the receiver of the amount must necessarily send a receipt to the person who remitted such amount.  It may be a hard copy or a soft copy sent to the registered email address of the remitter or both.

Penalise Cash Transactions

1. Depositing cash into a running account like Current Account or Savings Bank Account will be permitted, without any restrictions.
2. However, Cash deposits beyond Rs.50,000 will be charged at the rate of 0.01%, with a minimum of Rs.10 and a maximum of Rs.500 per transaction.
3. Cash deposited in an account will be available for withdrawal/disposal by the account holder, only the next working day.  In other words, only the closing balance of the previous working day will be available to the account holder for withdrawal or settlement of his financial commitments (This will solve most of the problems of the banks, reduce complaints and improve their overnight deposit balances too).
4. In ATMs, cash withdrawals beyond Rs.25,000 will be charged at the rate of Rs.25 per transaction.  To avoid multiple usage, this limit is fixed per card, per day.
5. At the branches, cash withdrawals will not be allowed beyond Rs.50,000 (However, this will be implemented in phases).
6. At merchant outlets, any purchases beyond Rs.25,000 must be necessarily through debit/credit cards only.  This limit is per card, per day.
7. A person using multiple cards for a single transaction/purchase is liable for criminal prosecution.
8. A merchant outlet who suggests and aids such practice will also face be penalised.
9. All cash payments purported to have taken place for the purchase of a property/ movable asset or an investment beyond the limit of Rs.50,000 per purchase/investment will not be taken cognisance of by legal authorities.  Thus, such cash payments will be treated as ‘Null and Void’.  So, both the buyer (one who pays) and the seller (receiver of money) will be compelled to use banking channels or internet banking without any exception, to protect their mutual interests. 

However, before enforcing this stringent condition, all people must be suitably educated and a widespread campaign through mass media is to be undertaken by the central and state governments.  Such campaign must be made in all the 22 languages figuring in the Eighth Schedule of the Indian Constitution and it will last at least for a few months.

Others

1. Before introducing these changes, either Permanent Account Number (PAN) or Aadhaar Number of a person shall be linked to all his/her bank accounts and credit cards (If a bank account is linked, then automatically his/her debit card and internet banking will also get linked).
2. It shall be ensured that a person having multiple bank accounts or multiple cards shall be brought under single customer ID.  This requires some modification in the existing software of the banks.
3. A person with ‘nil’ income or a low income and hence remains outside the purview of income tax now shall be taxed at the uniform rate of 20%, for all his/her purchases/investments made beyond certain limit.  We may for the time being keep this limit as Rs.25,000 per transaction.
4. Corruption of government officials and tax enforcing officials shall not be allowed to defeat the objective of this proposal.  Therefore, those who are found indulging in corruption, thereby helping tax evasion, shall be severely punished.
5. The government may welcome further views and suggestions from general public, before finalising its policy in this regard.

Date: 23-06-2015                                                                                                       pannvalan