A decade ago, using a credit or debit card was a status symbol. Today it's more about convenience. Recently, the government has proposed income tax benefits for individuals to encourage the usage of debit or credit cards. Read on to know more.



The use of cards has only been increasing and it is not long before cash will be replaced by cards and electronic transfers. By incentivizing the usage of cards, many more people are expected to prefer plastic money over cash. This move will also push those people to swipe cards, who own credit or debit cards but do not use them regularly. The government proposal included the following points.



1. Banks will push high value card transactions



If a credit card holders total payment amount crosses Rs 2 lakh in a year, then the bank has to report the aggregate of all the payments made by a credit cardholder. The government has proposed to increase the reporting limit from Rs 2 lakh to Rs 5 lakh. This has been proposed in order to facilitate high value transactions. Banks will definitely make high value card transactions more lucrative by announcing incentives for using cards.



2. Card users can save on tax



There is a probability that income tax rebates may be offered for consumers who use electronic mediums to make payments. However, to enjoy that benefit customers will have to pay a certain proportion of their expenditure through electronic transactions.



3. They say, do not worry about card frauds



Many people are reluctant to use cards or other electronic media due to fraudulent transactions. Also, resolving these frauds cost time and money accompanied with a headache. To address this issue, the government has proposed a new redressal mechanism. In case of a fraudulent transaction the money will be credited to the customer's account and blocked. This will take care of the customer's fear of losing money due to frauds. A parallel investigation will run and the money will then be unblocked. The time limit for this is 3 months.



4. No charge on cards



Charges applicable on card payments are one of the primary reasons people steer clear of swiping for payments. The proposal acknowledged and addressed this issue by stating that there will be no transaction charges applicable on payment made through cards for railway tickets, petrol pumps and gas agencies.



5. Lakhs can only be wired





The proposal suggests that a transaction of Rs 1 lakh or above falls under the high value transaction category. Soon, high value transactions will be restricted to electronic media only. This move will help in controlling black money movement and help in tracking high value transactions effectively.Yes, there is a possibility that you may soon be charged for cash transactions. Cash handling charges will be levied on customers who want to go for cash transactions which will shoot the cap amount. Customers will rather use cards or the electronic media over paying transaction charges for cash.Merchants will be encouraged to accept electronic payments by offering tax rebate. If at least 50 per cent of the value of the transactions is made through electronic mode then the merchants can enjoy tax rebate benefits. There is also a recommendation made for reduction in applicable value added tax for all electronic transactions by merchants.Up to 1 per cent of the bill value can be offered as discount if the payment is done through electronic mode. These discounts will be applicable on utility bills like those for electricity, telephone, etc. Customers are expected to shift towards electronic payments to enjoy these discounts.Currently only about 10 per cent of the value of transactions are made electronically in India. The government's proposal which has been made post consultation with banks, card service providers, utility service providers, research institutions, etc. should help in pushing up that number. This move will also curb the usage of black money and facilitate tracking of financial transactions. Say goodbye cash and hello to cards.