If the government is really serious about a cashless economy

Whether demonetization of Rs. 1,000 and Rs. 500 notes has been a success is anybody's guess. However, one thing is clear - a lot more is required to curb corruption and black money. The common man had to undergo a lot of stress and chaos since November 8th and the distress is still continuing. Most ATMs are either closed or throwing only Rs. 2,000 notes!

While the intention was noble, probably the timing was not correct and the government was not well advised on the repercussions and the infrastructure required to undertake such a gigantic transition. However, the government seems to be hell-bent on a less-cash economy henceforth. If that be so, following are a few suggestions that the finance ministry and the PMO may consider while finalizing the Finance Bill 2017:

1. Introduce Aadhar based payments (authenticated through fingerprint) first and there should not be any charge on card transactions. If you are compelling people to accept non-cash receipts, they cannot be asked to forgo a part of their hard earned revenue.
2. Amend section 40A(3) of the Income-tax Act to reduce the threshold from Rs. 20,000 to Rs. 5,000 without exception. Further, salary, wages, bonus, commission or any other form of payment to employees and consultants should not be allowed as tax deduction unless paid through banking channels.
3. Prescribe 2% lower tax rate for businesses / professionals that receive at least 80% of their revenue through banking channels. This will incentivize businesses to ask for receipts through banking channels.
4. Instead of levying tax on cash withdrawal from bank (like the Banking Cash Transaction Tax introduced earlier by Mr. Chidambaram), levy 2% tax on cash deposits in excess of Rs. 100,000 per month into any savings account and Rs. 500,000 into any current account.
5. All political donations (without any threshold) should be through banking channels and quoting PAN of the donor should be mandatory.
6. Any sale of consumer durables, gold, silver, bullion, foreign exchange and ornaments exceeding Rs. 25,000 would be allowed only on production of PAN / Aadhar card.
7. Cash holding more than Rs. 500,000 by any person should be subjected to 100% tax and 100% penalty.
8. Our culture does not allow bragging after donating or financially helping someone. It rather provides that if the right hand donates, the left hand should not be aware of the same. Why then is 80G certificate required? Charitable trusts have been indiscriminately used for tax avoidance. Post demonetization, even schools are also directing parents to pay capitation fee through donation to trusts. Modify the scheme of taxation of trusts and investigate the money trail of expenditure by trusts. Are they really for public benefit or for the benefit of trustees?
9. Link all bank accounts, D-Mat accounts and bank lockers through Aadhar and PAN.

Eradication of corruption and black money from this country will take time. It requires a change in our mindset and a visible improvement in the quality of public services and public expenditure. People should be able to visualize that their money is well spent by the government and only then would more people  volunteer to pay their taxes. There is a visible trust deficit and government should try to bridge that gap.