PIB February Week 1 – Budget gives a major push to Digital Economy

• In a bid to give a push to Digital Economy and weed-out corruption and black money, Government has decided that no transaction above Rs 3 lakh will be permitted in cash.
• Accepting a suggestion by Special Investigation Team on Black Money to ban cash transactions above Rs 3 lakhs, the Finance Minister has proposed an amendment to the Income-tax Act in the Finance Bill.
• 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.
• Aadhar Pay, a merchant version of Aadhar Enabled Payment System, will be launched shortly.

Benefits

• 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 2,500 crore digital transactions for 2017-18 through UPI, USSD, Aadhar Pay, IMPS and debit cards.
• Banks have targeted to introduce additional 10 lakh new PoS terminals by March 2017.
• They will be encouraged to introduce 20 lakh Aadhar based PoS by September 2017.
• It will have 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.
• The Budget proposed to limit the cash expenditure allowable as deduction, both for revenue as well as capital expenditure, up to Rs 10,000.
• Similarly, the limit of cash donation which can be received by a Charitable Trust is being reduced from Rs 10,000/- to Rs 2000/-.

Other recommendations and plans

• 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.
• To strengthen the digital payment infrastructure and grievance handling mechanisms the focus would be on rural and semi urban areas through Post Offices, Fair Price Shops and Banking Correspondents.
• 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 increased digital transactions will enable small and micro enterprises to access formal credit.

The Government will encourage SIDBI to refinance credit institutions which provide unsecured loans, at reasonable interest rates, to borrowers based on their transaction history.