It is imperative to develop systems such as incentivising the use of credit and debit cards for small purchases to plug the loopholes in India’s bustling cash economy that remains a major area in the proliferation of black economy, the white paper tabled in Parliament said on Monday.
“Given the primary importance of cash in relation to both generation and use of black money, there is no alternative but to target cash transactions in a way that will not affect those complying with the law, while making it difficult for those intending to generate and utilise black money,” the white paper said.
This will require keeping fairly high transaction limits and exempting those with a reasonable audit trail at both ends of the transactions.
Payments by debit and credit cards through Indian e-service intermediaries can further bring down the costs of using such cards, improve their acceptability, and encourage payments in these modes and reduce the cash economy.
The government can also think of providing tax incentives for use of credit/debit cards as practised in Republic of Korea. Collection of tax at source at a low level on cash purchases may also be considered as a possible policy option.
“It is imperative that payment of wages and salaries in the private sector should also be through banking channels and should become cashless, in line with the government objective of financial inclusion,” it said.