To help incent the use of electronic payments, India is considering allowing consumers to reduce their taxable income by a percentage of the transaction volume that they spend with credit and debit cards:
Credit or debit card users may get to claim 1% of their annual transactions as deduction from income, if a proposal made by a section of the finance ministry is implemented, reports Prasanta Sahu in New Delhi. The move could marginally reduce the income tax liability of credit and debit card users.
The benefit also extends to merchants who accept and promote electronic payments:
Merchants could also get a rebate on their income tax and service tax liability for promoting electronic transactions if the department of revenue (DoR) agrees with views expressed by the department of economic affairs (DEA), sources said. Following a Budget announcement to incentivize electronic transactions and dis-incentivize cash transactions, the DEA unveiled a draft scheme on June 18 listing out the proposals to achieve this objective.
It is interesting to ponder how similar tax incentives in the US would impact fledgling payments like EMV or mobile.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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