Budget 2019 : Digital payments
To further encourage people to use digital payments as the preferred mode of their transactions, the Union Budget has announced the following measures to make digital payments successful-
- A 2% tax deduction at the source is proposed for all cash withdrawals exceeding Rs 1 crore in a year from a bank account.
- To encourage a digital mode of payments like the BHIM UPI, UPI-QR Code, Aadhaar Pay, certain Debit cards, NEFT, and RTGS, the Government has decided to allow business establishments with an annual turnover of over Rs 50 crore to use digital transactions.
- No Merchant Discount Rate (MDR) or other charges will be imposed on the businesses and the costs will be absorbed by the RBI and associated banks.
- The RBI and banks can save money by incurring fewer costs on handling cash in their care.
What’s the current situation?
According to data from the Reserve Bank of India (RBI) and the National Payments Corp. of India, digital transaction volume through various modes has gone up from 796.7 million in October 2016 to 3,323.4 million in March 2019. In the same period, the value of transactions went up from Rs 108 trillion to Rs 258 trillion.
Is all ok?
While the industry has lauded the Finance Minister’s step to increase digital transactions, a major cause of worry is the lack of internet penetration in the country. There is also a need to strengthen the digital infrastructure and improve digital literacy in the country.