If the Finance Ministry has its way, people could soon get income tax benefits for paying with credit or debit cards. The proposed changes would reduce tax avoidance and also help build a credit history for people wanting to avail of higher credit.

In a draft paper on facilitating electronic transactions, the government on Monday proposed doing away with transaction charges on the purchase of petrol, gas and rail tickets with plastic money. It also proposed making it mandatory to settle transactions of more than Rs 1 lakh through electronic mode.

“Tax benefits in terms of income tax rebates to be considered to consumers for paying a certain proportion of their expenditure through electronic means,” said the proposals.

Shopkeepers too could get a tax rebate if they accept a significant value of sales through debit or credit cards.

“An appropriate tax rebate can be extended to a merchant if at least say 50 per cent value of the transactions is through electronic means. Alternatively, 1-2 per cent reduction in value added tax (VAT) could be considered on all electronic transactions by the merchants,” said the draft.

The government has invited the public to comment on its proposals by June 29.

Finance Minister Arun Jaitley in his budget speech had said that the government would “introduce soon several measure that will incentivise credit or debit card transactions and disincentivise cash transactions”.

- Karan Singh

To Learn More:

Cash out: Govt proposes tax benefits for credit and debit card payment (Hindustan Times)

Government proposes income tax benefits for debit/credit card payments (PTI)

Debit, Credit Card Payments May Bring Income Tax Relief: 10 Facts (NDTV)