"Incentivising use of Debit-Credit cards is a landmark initiative"

Debit cards, Credit cards, debit credit cards, CAIT, Praveen Khandelwal, Confederation of All India Traders
New Delhi : "Draft proposals for promotion of usage of Debit & credit Card as mode of payments and subsequent relaxations in payment of Income tax by the Government is a landmark initiative which will go a long way in making cash less society in India", said Praveen Khandelwal, Secretary General of the Confederation of All India Traders (CAIT) while reacting on release of a Draft proposals by Finance Ministry yesterday for facilitation of electronic transactions in India.

The CAIT in association with MasterCard has already launched a national campaign to induce trading community to adopt e-transactions in their business.The campaign was launched on 3rd June at New Delhi at a Traders Conference. The traders are eager to embrace digital payments provided they get facilities-said CAIT.

B.C.Bhartia, National President of CAIT said that in draft proposals, the Government intend to give discounts in payment of Income Tax through debit/credit cards to Individuals only. This benefit should also be passed to business entities. Transaction charges taken by the Banks on card transactions should be removed at least for next few years in order to encourage more people to embrace e transactions.

Currently the Banks usually charge 2% on Credit Card and 1% on Debit Card transactions which discourage people to embrace e-payments. Currently the rentals of card swipe machines are about Rs.1000 per month or one time cost of such machine ranges from Rs.6000 to Rs.10000.

He further said that Government should also subsidies rentals or cost of card swipe machines which is another deterrent for usage of digital payments. Both usage of digital payments and availability of more and more point of sales will compliment each other of more usage of payments through Cards.A scheme of discounts in VAT tax payment to Tax Departments will further encourage the people to adopt e payments in India.

Both Bhartia & Khandelwal said that India is predominantly a cash-based economy, with less than 5 per cent of Personal Consumption Expenditure (PCE) of INR 70,000 crore transacted by electronically payments. There are over 500 million debit cards – 100 million added in 2014 as a direct result of the Prime Minister’s Jan Dhan Yojana (PMJDY).

But the momentum of cash is strong. Those cards are used almost entirely at ATMs rather than at the point of sale (a ratio of 10 cash transactions to 1 at the point of sale). Considering just currency, the ratio of currency to GDP in India (12.2%) is higher than countries such as Russia (11.9%), Brazil (4.1%) and Mexico (5.7%).

The true value of electronic transactions is maximized when cards are used at the point of sale, rather than as a transactional tool to withdraw cash. Benefits flow to the entire value chain including for faster transactions and settlement, ticket lift, reduced handling costs, theft loss and counterfeit for merchants.

For cardholders, more efficient payments means more in bank accounts and less in wallets, flexibility of payment options, account management and enabling purchases on the phone or the internet.

For Government, the benefits are clearer still, with an enormous reduction in leakage from subsidies and support payments, increased tax revenue from a smaller grey economy and cost reductions from greater efficiencies.

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