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'Incentives could be expected in the Budget to give an impetus to digital economy'

Praveen Dhabhai     January 31, 2017

The post demonitisation noise emanating from the corridors of power surely points to a certain keenness of government to move the direction of the economy to a digital or less cash economy.

The demonitisation drive resulted in people trying the electronic payment options. Even as political detractors continue to play the devil's advocate, the government looks resolute to leave a mark as it forges ahead with all measures necessary to achieve a more transparent and digital economy.

A strong tax policy with several tax incentives and exemptions to boost cashless and electronic payments may be on the anvil and the finance minister sets out to unveil the National Budget on February 1st.

The government has already proposed to reduce the deemed profit rate from 8% to 6%, with respect to total turnover or gross receipts received through banking channel or digital means for the current financial year. This tax relief applies to all tax payer groups such as individuals, HUF (Hindu undivided family) or partnership firms other than limited liability partnerships (LLP) carrying on any business other than transportation, agency, brokerage and commission and having a revenue of R2 crore or less. The necessary legislative amendment will be done through the Finance Bill, 2017.

On the same lines, some further incentives could be expected in the Budget to give an impetus to digital economy. The government is clearly seeing the benefits of the cashless system of payment through the intelligent electronic transaction processing platforms developed by some private IT solutions providers, which came to the rescue of people of the country soon after Rs 1000 and Rs 500 notes lost the status of being legal tender.

The government also senses that a large chunk of the retail businesses in India will be transacted through mobile applications. Given the surge in sales of smart phones, it is envisaged that people will switch to buying through applications loaded on to their phones. There is a possibility therefore that the Budget may provide financial incentives for switching to electronic transactions with minimal dependence on cash.

The need of the hour is enabling all types of retailers to switch to an electronic mode wherein it becomes convenient for them to accept payments against sales conducted. Hence investment in such systems may be incentivized.  

These apart, online shoppers in India are likely to reach a figure between 175 to 220 million by 2020, of which over 60 per cent are likely to prefer mobile devices. This is also because people now prefer mobile wallets for transactions as they are hesitant towards sharing bank account details or credit/debit card details. There are umpteen reports of this type of sensitive information becoming compromised owing to hacking.

It is therefore a distinct possibility that the government may introduce measures for enabling beefing up security systems and also encouraging ethical hackers. Their efforts may also be incentivized for encouraging a greater involvement on their part to detect and dismantle systems that give rise dangerous hacking and loss of wealth of those using the online systems to transact businesses.


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