Personal Finance

Benefit more from digital payments in 2020

Parvatha Vardhini C BL Research Bureau | Updated on January 02, 2020 Published on January 02, 2020

The government and RBI have rung in 2020 by showering greater benefits for non-cash payments

It’s a new year, worthy of a fresh start for your financial goals. To the list of many resolutions — such as getting adequate insurance cover, continuing with SIPs and writing your Will — one thing that could be added is a more frequent use of digital or electronic payment modes in 2020.

Aside from the reward points, attractive offers and plain convenience, the government’s restrictions on cash transactions in various ways are a good reason to go digital. The government and the RBI have also rung in 2020 with more benefits for digital transactions.

Three cheers

For one, online NEFT transactions (either through internet banking or mobile apps) for savings account customers are completely free from January 1. Earlier, each online and branch NEFT transaction could attract charges from ₹2.50 to ₹25 (exclusive of GST), depending on the amount transferred. Now, only NEFT transactions at branches will continue to be charged.

Besides, from December 16, 2019, NEFT has been made available on a 24x7 basis, with settlement every half an hour. Earlier, it could be done on working days alone and transactions done after 7 pm would get settled only the next day. It is worth noting that RTGS timings were extended earlier in 2019, making it available from 7.00 am to 6.00 pm.

Secondly, to give a boost to smaller digital payments, the RBI last week brought out a new prepaid instrument (semi-closed) which can be issued both by banks and non-banks, either as cards or in electronic form. This is somewhat similar to wallets such Paytm, Ola Money and Mobikwik, but can be loaded only from a bank account and used only for the purchase of goods and services. Funds transfer is not allowed.

Minimal KYC

To ease the adoption of this mode of payment, KYC norms have been made minimal. The requirements are a mobile number verified with OTP and a self-declaration of name and identification number of any officially valid document.

Thirdly, it has been made mandatory for some businesses to provide certain digital payment options from January 1. Charges by banks or system providers have also been waived for such options in a bid to nudge both business owners and customers to go for them.

Thus, from January 1, any business with a turnover or gross receipts of over ₹50 crore should allow payments through debit cards powered by RuPay and through UPI (BHIM UPI and BHIM-UPI QR code) along with any other electronic modes of payment that it may already be offering. To encourage sellers to adopt these prescribed modes, all charges, including merchant discount rate by banks or system providers, have been waived. Eligible businesses face a penalty of ₹5,000 for every day of non-compliance from February 1, 2020 onwards.

The rationalisation of merchant discount rates on card transactions (implying wider acceptability of card payments across big and small businesses), calculation of presumptive income for small businesses at a concessional 6 per cent rate on digital receipts/turnover (8 per cent for cash receipts/turnover) and waiver of RBI’s charges on banks for NEFT and RTGS transactions are other means through which the adoption of digital payment modes has been encouraged in recent times.

‘Say no to cash’

While providing a fillip to digital transactions, the government has also indirectly been discouraging cash transactions. Restrictions have been placed on cash spends from as little as ₹2,000. So, if you are fond of charity, donations over ₹2,000 in cash won’t qualify for deduction under Sec 80G.

If you are running a business and you incur a cash expense (single or aggregate) of ₹10,000 in a day, you cannot claim this expenditure as deduction in the calculation of your business income for tax purposes. Similarly, if you have spent anything over ₹10,000 in cash in a day (single or aggregate) for acquiring an asset, the amount will be ignored for the calculation of the cost of the asset. Besides, acceptance/repayment of loan or deposit or payment for a property over ₹20,000 (single or aggregate) can attract a penalty equivalent to the amount paid or repaid.

Budget 2017 barred the receipt of ₹2 lakh or more in cash in aggregate from a person in a single day or in respect of a single transaction or transactions relating to one event or occasion. A penalty equal to the amount involved is charged for contravention.

To keep tabs on high-value cash withdrawals, Budget 2019 empowered banks, including co-operative banks and post offices, to levy a 2 per cent TDS on withdrawals in excess of ₹1 crore from September 1, 2019 onwards.

Redress mechanism

While taking steps to push digital transactions, a mechanism for grievance redress has also been put in place. Problems can crop up in plenty — from failure to load money on to wallets, and credit to the unintended account and non-refund of cancelled or failed transactions.

To deal with such grievances, the RBI brought out an ombudsman scheme for digital transactions last year. The scheme applies to grievances arising from payment services provided by entities other than banks. Prepaid instruments, mobile/electronic transfers, UPI/Bharat Bill Payment System/UPI and Bharat QR Code are covered under this scheme. For deficiency in electronic payment services provided by banks, you can approach the banking ombudsman.

Published on January 02, 2020
  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.