Chennai, NFAPost: Since demonetisation in 2016, the government has taken various measures to encourage digital transactions. On her Budget speech on Friday, Finance Minister Nirmala Sitharaman too stressed on promoting digital payments by proposing a slew of measures.
To discourage the practice of making business payments in cash, the government has proposed to levy TDS of 2% on cash withdrawal exceeding Rs 1 crore in a year from a bank account. There are low-cost digital modes of payment such as BHIM UPI, UPI-QR Code, Aadhaar Pay, certain Debit cards, NEFT, RTGS etc. which can be used to promote less cash economy.
The finance minister said that the business establishments with annual turnover of more than Rs 50 crore will offer such low cost digital modes of payment to their customers and no charges or Merchant Discount Rate shall be imposed on customers as well as merchants.
The Reserve Bank of India (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, she said in the speech.
Ankur Choudhary, co-founder and CIO of Goalwise, a goal-based investment platform, said that the announcement of TDS of 2% on cash withdrawal exceeding Rs 1 crore in a year from a bank account will definitely boost online payments.
“Also, custom duty has been increased from 10% to 12.5% on gold and a cess of Re 1 have been levied on petrol and diesel prices. Hence, investors should look at other saving instruments such as mutual funds,” he said.
Saurav Goyal, CFO, Money View said, “TDS on cash withdrawal in excess of Rs 1 crore and no charges on MDR on business and customer for the business whose annual turnover is less than Rs 50 crore, is a great step in India moving towards a digital economy. This will also lower / discourage the cash transaction, thereby leading to an increase in tax collection of the government and curbing illegal transaction.”