Benefits of e-Payments

Benefits of e-Payments

Question: GoI has recently incentivised e-payment or electronic transactions to curb black money. Technology has changed the way the world works and conducts transactions. Discuss the benefits of e-payments.

• Government has recently made the proposal to incentivise e-transactions as against cash dealings to curb black money

• e-Payment connotes a more holistic approach to the cash economy

• Government has suggested income tax benefits for individuals incurring a certain proportion of their expenditure via electronic means

• Nominal handling charge on cash transactions above a specified level is also being sought

• The government has also proposed a tax rebate for those handling 50% of their transactions through e-payments and a small reduction in VAT on items involved

• Currently, system discriminates against electronic transactions, but it should be noted that cash transactions come at a price including cost of printing, additional security features and price of counterfeit cash

• There is a direct link between cash transactions and black money as the cash trail is impossible to track

• E-transactions also promote ease of audit and this makes the government’s job of curbing illegal transactions easily

• Utility service providers also offer discounts to customers for payments made electronically

• Electronic payments also leave a trail which is easy to detect in the event that there is a counterfeit currency

• According to a report prepared in 2010 by IB, RAW, Directorate of Revenue Intelligence and CBI, for every INR 1000 currency note in circulation which are real, 4 are fake; this pegs black money at INR 3200 crore in 2015

• e-Payments are also eco-friendly

• Large international organisations also experience improvements in day sales outstanding and processing cost reduction

• Minimising overdue payments is also another benefit of e-payments

• It also simplifies dispute management and increases compliance besides enhancing security

• It also improves workflow efficiencies and greater visibility into financial supply chain

Facts and Stats

• India is currently a massively cash dependent economy

• Its cash to GDP ratio is around 13% compared to global average of 2.5 to 8 percent

• Many experts estimate the size of the black economy of India to be a minimum of 50% of the white economy