In order to boost digital payments, Finance Minister Nirmala Sitharaman announced multiple measures in her maiden Budget, including levying 2% tax deducted at source on cash withdrawals exceeding ₹1 crore in a year from a bank account.
“To promote digital payments further, I propose to take a slew of measures. To discourage the practice of making business payments in cash, I propose to levy TDS of 2% on cash withdrawal exceeding ₹1 crore in a year from a bank account,” she said.
“This move will discourage spending which will be a big blow to the economy. There are both pros and cons of a digital payment ecosystem. India is not fully equipped to leverage this system,” said New Delhi-based businessman Ajit Khosla who deals in money transfer, traveling and remittance business.
“I propose that the business establishments with an annual turnover of more than ₹50 crore shall offer such low-cost digital modes of payment to their customers and no charges or Merchant Discount Rate shall be imposed on customers as well as merchants,” she said. These costs will be absorbed by the RBI and banks from the savings that would accrue to them as a result of handling less cash, said the Minister.
The payments industry has welcomed the proposals saying these would help create a robust payments infrastructure in the country. However, the industry leaders underlined the need for sufficient Internet penetration and data reach to achieve aspirations.
“I believe this will discourage businesses from making cash transactions and encourage them to make payments through digital channels,” said Harshil Mathur, CEO and Co-Founder, Razorpay.