In a bid to give a push to the digital economy of India and weed-out corruption and black money, Finance Minister Arun Jaitley made a number of announcements in his Budget 2017 presentation.
Presenting the Union Budget 2017-18 in the Parliament, the Union Minister for Finance and Corporate Affairs, Arun Jaitley said that the Government will launch two new schemes to promote the usage of BHIM App i.e., Referral Bonus Scheme for individuals and a cashback scheme for merchants. BHIM App was launched to promote digital transactions and will unleash the power of mobile phones for digital payments and financial inclusion, the Finance Minister Jaitley informed the House that 12.5 million people have adopted the BHIM app so far.
“Digital economy helps in cleaning up the system, has transformational impact, energises private investment through low cost credit, and benefits the common man,” said Jaitley.
The Finance Minister in his Budget speech also said that the government has decided that no transaction above INR 300,000 will be permitted in cash. Accepting a suggestion by special investigation team on black money to ban cash transactions above INR 300,000, the Finance Minister has proposed an amendment to the Income-tax Act in the Finance Bill.
Jaitley also announced that Aadhar Pay, a merchant version of Aadhar Enabled Payment System, will be launched shortly. This will be specifically beneficial for those who do not have debit cards, mobile wallets and mobile phones. A mission will be set-up with a target of 25 billion digital transactions for 2017-18 through UPI, USSD, Aadhar Pay, IMPS and debit cards. Banks have targeted to introduce additional one million new PoS terminals by March 2017. They will be encouraged to introduce two million Aadhar based PoS by September 2017.
Highlighting the Government’s strategy to clean the system through digital economy, Jaitley said that it has a transformative impact in terms of greater formalisation of the economy and mainstreaming of financial savings into the banking system. This, in turn, is expected to energise private investment in the country through lower cost of credit. India is now on the cusp of a massive digital revolution, he added. The Finance Minister said that a shift to digital payments has huge benefits for the common man. The earlier initiative of the Government to promote financial inclusion and the JAM trinity were important precursors to the current push for digital transactions, the Finance Minister added.
In a bid to incentivise the digital transactions, the Finance Minister Jaitley proposed that the presumptive income tax for small and medium tax payers whose turnover is up to INR 20 million will be reduced from the present 8 pc of their turnover which is counted as presumptive income to 6 pc in respect of turnover which is received by non-cash means. This benefit will be applicable for transactions undertaken in the current year also, he added.
To promote cashless transactions, the Finance Minister in the Budget has proposed to exempt BCD, Excise/CV duty and SAD on miniaturised POS card reader for m-POS, micro ATM standards version 1.5.1, Finger Print Readers/Scanners and Iris Scanners. He also proposed to exempt parts and components for manufacture of such devices, so as to encourage domestic manufacturing of these devices.
To strengthen and regulate the digital economy, the Finance Minister has proposed to create a Payments Regulatory Board in the Reserve Bank of India (RBI) by replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems. The Committee on Digital Payments constituted by the Department of Economic Affairs has recommended structural reforms in the payment eco system, including amendments to the Payment and Settlement Systems Act, 2007. The Government will undertake a comprehensive review of this Act and bring about appropriate amendments, Finance Minister added.
Digitisation of rural and semi urban areas
To strengthen the digital payment infrastructure and grievance handling mechanisms, the Finance Minister said in his Budget Speech that the focus would be on rural and semi urban areas through Post Offices, Fair Price Shops and Banking Correspondents. He added that steps would be taken to promote and possibly mandate petrol pumps, fertilizer depots, municipalities, Block offices, road transport offices, universities, colleges, hospitals and other institutions to have facilities for digital payments, including BHIM App. A proposal to mandate all the Government receipts through digital means, beyond a prescribed limit, is under consideration. The Government will strengthen the Financial Inclusion Fund to augment resources for taking up these initiatives, the Finance Minister added.
In his Budget Speech, the Finance Minister informed that increased digital transactions will enable small and micro enterprises to access formal credit. He said that the Government will encourage SIDBI to refinance credit institutions which provide unsecured loans, at reasonable interest rates, to borrowers based on their transaction history.