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Digital payments are big data

Tina Edwin | Updated on January 16, 2018

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The transactions trail they leave will help detect tax evasion

Demonetisation has forced consumers and small businesses to use their debit and credit cards more often, try mobile banking and adopt e-wallets. As a change in habit, that is a welcome development — it reduces the need to carry enough cash on shopping trips and saves vendors and shopkeepers the bother of keeping track of cash collections and keeping the money safe till it is deposited in the bank. If this new habit is not abandoned when the currency crunch eases, India will firmly move towards a less cash economy, although getting there is a long haul.

Every transaction completed with the swipe of a card, or using internet or mobile banking or e-wallets, leaves a digital trail. This trail would become a rich source of information that the tax department can use to identify tax evasion. For honest taxpayers, that should be of no concern. However, for merchants, vendors and shopkeepers, the convenience of accepting digital payments could be replaced with nightmares of tax compliance, particularly if they do not maintain proper books of accounts.

There is no doubt that the Government will mine the data on transactions in its efforts to widen the tax net. Just about 40 million individuals, businesses, firms and corporate entities file I-T returns currently, and the actual number of those paying tax is lower. In the bid to curb re-emergence of unaccounted cash as well as to collect more from income taxes, the Government could direct payment gateways and e-wallet companies to share information on individuals and merchants exceeding a certain threshold in payments and receipts. Credit card issuers are anyway required to file annual information reports where payment on a card exceeds ₹2 lakh in a year.

Tina Edwin Senior Deputy Editor

Published on December 04, 2016

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