As we complete a year since the last demonetisation exercise, income tax returns were claimed to have increased by one fourth and revenue by two fifths. So the Government seems to be looking at another push to digitisation. Will there another note ban soon? Paypal CEO, Rohan Mahadevan, was heard voicing public speculation that demonetisation may happen again (This may also be a marketing ploy to convince people to go digital).
The number of income tax filers has certainly risen. Among individuals, the number of tax returns declared before August 5 this year was 2,82,92,955 against 2,26,97,843 in 2016. Those performing self-assessment tax returns also went up by 34.25% and Advance Tax payments netted a growth of 41.79%.
It has been said that India is the only market where the government has a stated agenda to push digital transactions. In this context various arguments are made about benefits to tax revenue, exposing black money, counterfeiting, corruption and enforcing a general atmosphere of ‘loyalty to the State’.
In daily life, one needs Ten, Fifty and Hundred Rupee notes for several common needs such as grocery and commuting to work every day. Buses, which most of the population in this country use, do not have the option of digital transfers. Nor does the ordinary autowallah, the Sabzi Mandi or your favourite street food stall owner. Not everybody has a digital wallet.
If you hold an account in a private bank or the State Bank of India, you know that you will be penalised if you do not maintain a minimum monthly balance. Some classes of debit cards charge a fee for issuing the card. Then there are Annual Maintenance charges which may range from Rupees 100 to Rupees 500. If you lose your PIN then you will be charged Rupees 51 at the State Bank of India. There are charges for transactions at Point of Sale terminals varying from 0.75% to 1% of the transaction value.
To put things in perspective, consider a transaction of Rupees 500,000 at a hospital. 1% of this amount is Rupees 5000. And, if you use a Point of Sale terminal associated with a bank other than your own you would be charged Rupees 12,500 (at the rate of 2.5% of the transaction).
You are also charged for asking how much bank balance you hold. There are charges for booking rail and airline tickets. Online payment wallets charge 1.99 % of customer payments plus 0.35% GST and about 3% of amount transferred to banks as fee. Vendors usually do not allow transactions below Rupees 100 at POS machines and may choose to levy Rupees 50 to Rupees 100 per transaction since merchants are subject to independent bank levies. There are GST tax cesses on every service.
Now an article in the ‘Print’ claimed that the government is planning a “security cess” to setup a fund to meet the challenges of digital fraud and increase the expense of the very agenda it is trying to implement.
Perhaps, the purveyors of trickle-down economics thought that capital infusion into banks was more urgent than joblessness and the growth of credit in the informal sector.
We can take succour in the fact that the middle classes were taught some lessons in personal finance.