Moneycontrol
Jan 11, 2017 08:42 PM IST | Source: Moneycontrol.com

How will Budget 2017 offset demonetisation pain?

The "demonetisation" of Rs 500 and Rs 1000 in November has set in motion the biggest currency culling exercise in the modern era. Prime Minister Narendra Modi has talked about ushering India to "less-cash" society.

The "demonetisation" of Rs 500 and Rs 1000 in November has set in motion the biggest currency culling exercise in the modern era. Prime Minister Narendra Modi has talked about ushering India to "less-cash" society.

How potent will be the shadow of demonetisation over the union budget 2017-18? What are the kind of measures that one can expect to offset the pain, as also deal with black money and incentivizing digital transactions?

Amid the din of howls of protest against the sudden drain out of currency notes, the government is believed to be giving final touches to a comprehensive strategy to wean people away from cash transactions.

There are heightened expectations that finance minister Arun Jaitley will tax rebates and incentives, as also mechanisms for cash back (similar to the ones that mobile wallets operate) to encourage transactions through cards and digital means.

The government may announce the creation of a special corpus to fund PoS-based and digital payment systems in rural and remote areas in the budget.

Some analysts expect the finance minister to announce measures to tax cash withdrawals from banks above a threshold. The government may be examining the option based on a recent tax-reform panel's advice to bring back the banking cash transaction tax (BCTT), a measure tested during 2005-2009.
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