Sunday, February 21, 2016

Income Tax Benefits with Debit/Credit Card Transactions

Government of India has proposed plan in which you will get tax benefits for debit/credit card transactions. Yes, as per latest news from finance ministry of India, Finance ministry has proposed a plan in which people who transact with electronic medium or plastic money (debit/credit card) will get some percentage of Tax benefits.

Income Tax Benefits with Debit/Credit Card Transactions

Income Tax Benefits
Update 22th Feb, 2016:- The promise of last budget likely to be fulfilled, yes. as per the sources, Government like to give tax benefit on debit and credit card transactions in this budget 2016. is 

In last budget presentation, Arun Jaitley said that Use of plastic money is one of the way to curb black money flow and therefor they introduced Rupay Debit Card (which is india's own debit card and available with postal accounts, as of now).

What is current Scenario, how much tax or charge we are paying on Credit Card Transactions

At present,customers are not paying any tax on credit card transactions. Expect (petrol filling, which is mostly waived off by almost all banks). But on the other side, Merchant's need to pay Merchant Discount Rate (MDR) of 0.75% on Debit Card transactions upto Rs.2000 and 1% on all transactions above Rs.2000.

What can government do?

Tax benefits could be provided to merchants for accepting electronic payments, e.g. an appropriate tax rebate can be extended to a merchant if at least say 50% value of the transactions is through electronic means. Alternatively, 1-2% reduction in value added tax could be considered on all electronic transactions by the merchants.

At present, banks have to report the aggregate of all the payments made by a credit cardholder as one transaction, if such an amount is Rs. 2 lakhs in a year. To facilitate high value transactions, the ceiling of Rs. 2 lakhs could be increased to say Rs. 5 lakhs or more.

The existing inter-change fee on Debit/Credit Card transactions are not uniform and need to be standardized/rationalized to encourage both issuing and acquiring banks to establish and utilize acceptance infrastructure.

Read more suggestions on this here.

National Epayment Gateway: PayGov India

Yes, Government of india will introduce PayGov India Portal. On this PayGov India Portal will accept revenues, income tax, service tax, other bill payments (like CCevenue), government fees (like RTI fees), Government college fees etc. you can do NEFT transactions, IMPS, use it for internet banking etc.

In short PayGov portal will be next national portal where people can safely transact 3rd party transaction, using credit card or debit card. Department of Electronics and Information Technology (DEITY), along with NSDL Database Management Ltd (NDML) are going to made this portal online soon and will be reviewed by PMO Office.

Note :- NDML and DEITY is national IT management who made many web portals like MyGov and other recently. They do manage all web portals of Govt of india. 

Click here for More information about PayGov India e-Payment Transaction.

so, hows this plan? On first Impression it looks amazing. Providing tax benefits of Customer and Merchant will be masterstroke plan. Because many customers nowadays wanted to use debit card/credit card to buy electronic goods and electronic home appliance but merchant urge them not to use plastic money as merchant needs to pay extra 2%.

But with this effect both, merchant and customers will get tax benefits, so hope there will be increase in use of Plastic money and india will successfully crub black money flow. 

This suggestion still under review, hopefully it will be come under PMO and will be passed by Cabinet soon. After cabinet will pass it, Loksabha and Rajyasabha too pass this bill and then only this (Tax Benefits with Debit/Credit Card Transactions) will be implemented. So, till date wait for more updates.

Looking to buy Credit cards? Here is list of Top 10 Best Credit Cards in 2015.


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