NEW DELHI: The finance ministry’s white paper on black money has proposed tax incentives to encourage use of debit and credit cards, along with electronic transfer of funds.
The paper says promotion of banking channels and greater use of credit and debit cards can help check black money generation as they leave adequate audit trails. It says the government should deliberate on offering tax incentives on the use of credit or debit cards as practiced in South Korea.
“Provisions for collection of tax at source at a low level on cash purchases may also be considered as a possible policy option,” the white paper on black money tabled in Parliament said.
Payments by debit or credit cards through e-service intermediaries will simplify and encourage payments in these modes and reduce the cash economy, it said. With e-transfer facilities available to trade, one can foresee this as a major thrust towards strengthening accountability and discouraging unaccounted activities, it said.
The RBI data shows rising use of debit cards. The report also noted that as of now there are no legal restrictions on keeping very large amounts of cash with oneself or transporting it from one place to another. One is neither required to report it nor provide any explanation for it.
“There have been suggestions that the government may consider amending existing laws, including the Coinage Act 2011, The Reserve Bank of India Act 1934, FEMA, and the Indian Penal Code, or enacting an entirely new statute aimed at regulating the possession and transportation of cash above a particular threshold,” it said.
This may include setting a limit on cash holdings for private use, as well as provisions for confiscation of cash held beyond such a limit, it said.
However, such laws need a broader political consensus, it said.
Noting that trade practices such as cheque discounting should be discouraged, adding that the validity period of cheques or demand drafts has been reduced from six months to three months from April 2012.