(GIST OF YOJANA) Banking and Digital Currency
Banking and Digital Currency
Finance Minister made a provision of a Special Incentive Scheme in the general budget for the Financial Year 2021-22 with a view of boosting up digital transactions. It was felt that the virtual digital assets need to be regulated. India is one of the most efficient payment markets in the world. An efficient digital transaction ecosystem will give a boost to research, development, and innovation in Fintech space.
The Finance Minister made five major announcements in the General Budget for the FY 2022-23:
1. Continuous financial support to digital payments
2. Digital Banking Unit
3. Core Banking System in Post Offices
4. New Taxation System for Virtual Digital Assets like Cryptocurrency
5. Central Bank Digital Currency
Continuous Financial Support to Digital Payments
- The Finance Minister made a provision of a Special Incentive Scheme in the General Budget for the Financial Year 2021-22 with the view of boosting up digital transactions. It has now been pointed out in the current Budget that this scheme would continue during the Financial Year 2022-23 as well.
- Under this Scheme, transactions through RuPay Debit Card and of lower amount (up to Rs 2000) through BHIM UPI (Person to Management or P2M) will be encouraged. This Scheme was approved by the Union Cabinet in December 2021 under which certain banks will be given incentives in form of a percentage of the amount transacted through RuPay Debit Cards and lower value transactions by BHIM UPI. A provision of Rs 1300 crore has been made to meet the expenditure under this scheme which was launched on 1 April 2021. But it has not yet been decided as to how much amount will be spent in FY 2022-23.
- According to the Finance Ministry, this Scheme would provide help to the banks in building a strong digital payment ecosystem and in promoting RuPay Debit Card and BHIM UPI digital transactions in all areas and in further strengthening the digital transactions across the country. Besides, this Scheme will help in building simpler modes of making payments for those who are not covered under formal banking and those who are marginalised.
- India is one of the most efficient payment markets in the world. This has been made possible because of innovation in the field of digital transaction ecosystems. This will give a bigger boost to research, development, and innovation in the Fintech space.
Core Banking Solution in Post Offices
- The concept of financial adjustment, financial literacy, and financial diversity would be incomplete without the post offices. But, this is also true that the post offices did not lag behind any financial institutions during the rapidly changing times. Keeping that in mind, the Finance Minister announced the facility of “Savings in Post Office at any time and at any place”.
- In 2022, core banking system will get started in all 1.5 lakh post offices which will enable financial inclusion and one would be able to open an account through internet, mobile banking facility, ATM facility, and online money transfer from a post office account to a bank account. This will help in providing interoperability and financial inclusion facility to farmers and senior citizens residing in rural areas.
- CBS is a facility wherein all branches of a bank, a financial institution or any similar organisation gets connected through the internet. The customer is thus not required to make transactions from any defined point or at fixed working hours. Besides, the customer can get connected with other facilities of the financial system.
Taxation of Virtual Digital Assets:
The Finance Minister termed Cryptocurrency as a “Virtual Digital Asset (VDA)” and made three proposals:
- Income on all VDA will be taxed at the rate of 30%. There will be no permission for loss adjustment.
- TDS (Tax Deducted at Source) at the rate of 1% on VDA transactions will apply so as to facilitate such transactions.
- If VDA is received as a gift, then the one receiving the gift will be taxed at market value.
- The Finance Ministry has clarified that levying a tax does not naturally make VDA valid or legal. Discussions on declaring VDA as legal or illegal or for making regulations in this regard are going on and a law will be framed after these discussions are completed.