Measures to Promote Substantially Cashless Economy

INTRODUCTION : The Indian government is continuously making thorough efforts for achieving the goal of substantially cashless national economy. The goal is not easy to achieve. It requires undertaking of large number of measures of different types and varieties. The list of such measures is endless. However, in the present article efforts have been made to summarize few measures which can be instantly and easily taken by the government towards achievement of the above goal.

WAIVER OF CHARGES ON ELECTRONIC TRANSACTIONS :

All type of charges levied by the banks and government departments / institutions etc. on all type of electronic transactions done for transfer of money from one bank account to other (including charges taken by the railway on online reservations etc.) may be waived at least for the next three years. The losses to the banks due to waiver of above charges may be compensated by levying enhanced charges on banking services which involves withdrawals of cash, issuance of bearer instruments etc. This may have an additional benefit of discouraging the peoples from making unnecessary withdrawal of cash etc. which is one of the root cause behind generation of black money.

ALL PAYMENTS BY GOVERNMENT DEPARTMENTS, INSTITUTIONS ONLY THROUGH BANKS  :

All payments by the Central, State and Local governments and concerned institutions (e.g., institutions created by government, institutions created under any Act passed by Parliament etc.) and fully / substantially government owned companies / corporations may be made only through banks and that too in the account of the payee (no bearer instruments).  Initially, for the first three months it may be directory i.e., cash / bearer instrument payment may be allowed only in the cases of genuine hardship that too with the permission of the higher authorities of the department. Later on, when all the ground level real life difficulties will come in to consideration and solutions there for will be found, it may be made mandatory.

ACCEPTANCE OF TAXES, DUTIES, FEES ETC. BY THE GOVERNMENT THROUGH NON CASH MODE ONLY  :

The Central, State and Local governments may accept all taxes, duties, fees etc. only through non cash mode. The fees etc. in government educational institutions, universities etc. may also be accepted through non cash mode only (i.e., transfer from the bank account of payer to the bank account of payee. No direct cash payment in the account of the payee).  In the initial stages, say for the first 3 months it may be directory (as mentioned in immediately previous suggestion)and  later on, it may be made mandatory. The class of peoples which have to make such payments have already sufficient banking facilities therefore, the peoples may not get affected much due to this step but this step may be helpful in making the peoples habitual to use non cash modes.

GOVERNMENT GRANTS / SUBSIDIES / AFFILIATIONS ETC. ONLY TO THE ENTITIES ETC. DOING TRANSACTIONS  SUBSTANTIALLY IN  THE NON CASH MODE :

Only those organizations, entities etc. may be considered as eligible for the government grants whose transactions are substantially (say 90%, so as to leave room of 10% for meeting genuine hardships) through non cash mode (account to account transfer).

Similarly, the government affiliation etc. may be granted only to those educational institutions and other organizations etc. whose transactions are substantially through non cash mode (say 80%) and which provide facility of swipe card machine etc. to their members, students, customers etc. for receipt of fees etc. from them and have actually received some payments through that (say 10% of total receipts). In case of educational institutions some relaxations may be given e.g., single fee payment only up to Rs. 1,000/- may be accepted through cash etc. Some additional relaxations may also be given for rural areas etc.

Similar conditions of substantial non cash transactions (say 60%) and installation and actual usage of card swipe machine may be levied for grant of benefit of trade, business, industry project etc. related subsidies (including interest and other subsidies through bank loans).

The public awareness programs may be started at least 6 months before actual implementation so as to give the peoples time to move towards non cash transactions. For non cash transaction quantum criteria fulfillment , a certificate from chartered accountant may be required to be obtained in all cases.

NON CASH TURNOVER ETC. MAY BE MADE ONE OF CRITERIA FOR  BANK LOAN ELIGIBILITY :

Only those business entities may be considered as eligible for obtaining / renewal of bank loans for doing business who have installed swipe card machines for accepting payments from their customers, have actually made usage thereof and whose total transactions are substantially (say 50%) through non cash mode. While considering loan amount eligibility, greater weightage may be given for non cash turnover and very low weightage may be given for cash turnover. Here the public awareness program, sufficient time margin and CA certificate are also requirements.

ADDITIONAL POINTS IN ELIGIBILITY CRITERA FOR ALLOTTMENT OF  GOVERNMENT CONTRACTS ETC. :

While deciding eligibility criteria for allotment of government contracts etc. some additional preferential points may be given to those whose business transactions are substantially through non cash mode and who have installed swipe card machine for accepting payments from their customers etc. and have made actual usage thereof (say one additional point for non cash transactions up to 50%, 2 points for such transactions up to 70%, 3 points for 90%  such transactions etc.)

ADDITIONAL POINTS TO THE GOVERNMENT EMPLOYEES IN PROMOTION ETC. FOR AVOIDING CASH EXPENDITURE ETC. :

The Central, State and Local governments may promote their employees to avoid cash payments for their household expenditures etc. Those employees who substantially draw their salary from their banks accounts through non cash mode  for household expenditure, investments etc. may be given additional points while considering their promotions etc. This step will be much effective as government officials will be in a very sound position to take actions against the peoples who denies to accept non cash payment.

TAX BENEFITS UNDER DIRECT AND INDIRECT TAXES ONLY IN RESPECT OF NON CASH TRANSACTIONS :

The deductions / exemptions under the Income Tax Act may be restricted only to the cases where the concerned payment / deposit / receipt has been made through non cash mode (account to account transfer). Some of the examples are deduction U/s. 80C for payment of tution fee, Life Insurance Premium etc., exemption U/s. 11(1)(d) for receipt of corpus donations by the trust etc. Similarly, various deductions which are granted as a percentage of profit earned e.g., 80 IAC etc. may be restricted only to the cases of the entities whose transactions are substantially through non cash mode (say 60%) (based on CA certificate). Exemption to educational institutions etc. u/s. 10(23C), exemption U/s. 11 to charitable trusts etc. may be allowed only to the entities whose transactions are substantially through non cash mode. Apart from that the refunds / set off / rebate etc. under indirect taxes may be granted only in respect of non cash transactions (based on CA certificate).

INSURANCE CLAIM GRANT FOR LOSS / DAMAGE OF ONLY THOSE MOVABLE PROPERTIES WHICH HAVE BEEN PURCHASED / ACQUIRED THROUGH  NON CASH MODE :

Only those movable properties (e.g., motor vehicles, jewellery, household items etc.) may be made eligible for grant of insurance claim in case of loss / damages etc., which have been purchased through non cash mode.

INCLUSION OF CRITERIA FOR NON CASH TRANSACTIONS  IN VARIOUS RATINGS :

In cases of various ratings and rankings (like ranking in banks for giving benefit in interest rates, ranking of hotels like 5 star, 3 star etc.), points may be included regarding facility of swipe card machines, its actual usage and substantial non cash transactions. In cases where the ratings are given by non government organizations, the government may make attempt to get these criteria included by non government organizations also.

FIXATION OF LIMITS FOR BEARER INSTRUMENTS :

Bearer instruments serve as a cash to some extent. A limit may be fixed per bearer instrument (e.g., say a bearer cheque / self cheque may not be for an amount more than Rs. 5,000/-).

NO PERMISSION FOR DIRECT CASH DEPOSIT IN OTHER’S BANK ACCOUNTS:

A person / entity may be allowed to make cash deposit in his / its bank account only (by himself / through authorized persons). Deposit in other person’s / entity bank account may be allowed only through transfer from the payer’s account to the payee’s account.

IDENTIFICATION OF PLACES / THINGS OF LUXURY AND MAKING THEM FULLY CASHLESS  :

The places and things which falls within the concept of  luxury or identical may be identified and efforts may be made to ensure that the payments there for are fully in cash less mode (through appropriate tax and other regulatory mechanism).  For example, say payments for hotel rooms and amenities per day over Rs. 2,000/-, any payment to 5 Star or 3 Star hotel, any payment for any purchase from shops existing at big shopping malls, airports etc.,  payments for mobiles having price per mobile over Rs. 20,000/-, all payments to travel agents for foreign / local trips,  payments for LCDs, furniture, household equipments etc. having price per item over Rs. 50,000/-,  all payment for hiring of marriage gardens and to caterers etc., payment of annual fees to clubs etc. over Rs. 25,000/-, all payments for air tickets, all payments  for Ist Class and AC class tickets in railways, payment for purchase of all type of motor cars, payment for purchase of two wheeler having price over Rs. 50,000/-, private taxi charges payments over Rs. 5,000/-, payment for purchase of branded jewellery etc.

Due to such restrictions, there may not be substantial unaccounted acceptance of payment in cash, as maximum organizations depends upon bank loans and when banks themselves will insist on non cash turnover for loan eligibility criteria, the business organizations may not deny their customers to accept the payments in non cash mode.

LOWER TDS AND TCS RATES FOR NON CASH TRANSACTIONS :

At present TDS and TCS rates are equal for all cash / non cash transactions. Lower TDS and TCS rates may be prescribed for non cash transactions.

DISALLOWANCE OF DEPRECIATION FOR FIXED ASSETS PURCHASED IN CASH / THROUGH BEARER INSTRUMENTS & OTHER MEASURES:

The section 40A(3) of the Income Tax Act restricts single cash payment per day per person over Rs. 20,000/- only in respect of revenue expenditure. There is no restriction as to purchase of fixed assets/ capital expenditure in cash etc. These provisions may be extended to capital expenditure also (i.e., depreciation on such assets may be disallowed). Further, at present, only payer is subject to such restriction, there is no implication on the payee for accepting cash payment over Rs. 20,000/-. Therefore, in some cases, the payees insists on cash payments only. Some penal consequences may be imposed on the payee also for accepting cash payment over certain limits.

RESTRICTIONS ON FINANCE COMPANIES TO NOT TO NOT TO ACCEPT CASH PAYMENT  :

Many private finance companies allows cash payment towards installments of loan granted by them to the borrower. Many times when cheques are bounced due to any reason, they requires immediate cash payment of installment and charges from the borrower. The same may be restricted.

ENSURE SOME OTHER TRANSACTIONS THROUGH NON CASH MODE  :

The payments for Life Insurance premium, Mediclaim premium, telephone bill over Rs. 2,000/-, electricity bills over Rs. 1,000/- etc. may also be required to be made compulsory through non cash mode only. The refund for cancellation of Ist Class and AC class railway tickets should also be directly credited in the bank account of the concerned person. The class of people who have to make / receive such payments already have sufficient banking facilities there for and as such they may not get affected much.

INCENTIVES FOR MAKING NON CASH PAYMENTS  :

Incentives may also be provided in the form of discounts, extended due dates for payments (wherever applicable) etc. for making payments for telephone bills, electricity bills, railway tickets etc. The awards may be granted to the organizations, business entities etc. for 100% cash less transactions, for promotion of cash less ness etc. These awards may be for every city, every industry, every category of businesses i.e., small, medium, large etc. (In cases of more entries lottery system may be adopted). Apart from that the bank marketing agents may be directed to go door to door at business men’s premises and to promote them for installing swipe card machines and accepting payments through them.

 CONCLUSIONS : These are merely few measures which can be taken instantly and easily. Apart from the above measures, there may be large no. of other measures. The above measures may be very much helpful in achieving the goal of substantially cash less Indian economy.