Postmen with smartphones will offer banking
Q: I have relatives in rural areas to whom I frequently make remittances. Many of them only have post office accounts. I am told that post offices are also running banking operations. Is this so? A: The India Post has started a payments bank with the approval of the Reserve Bank of India. This bank will enable more than 170 million active account holders to make interoperable digital payments. Benefit of RTGS, NEFT, UPI and bill payment services will also be available.
At present, the India Post Payments Bank (IPPB) is offering facility of savings account up to a balance of Rs100,000 along with digitally enabled payments and remittance services between individuals. In due course, it will also provide financial services such as insurance, mutual funds, pension, credit products and foreign exchange. By the end of this year, the IPPB plans to equip all its postmen with smartphones with a view to offer doorstep banking facilities. Q: My friends and I have set up a company in Mauritius to invest in shares and securities on Indian stock exchanges. Most of us will be based in the Gulf. Will the company be entitled to claim benefit of capital gains tax exemption under the Mauritian treaty? A: Under the revised double tax avoidance agreement between India and Mauritius, it must be proved that the Mauritian company has been set up for the genuine purpose of doing business in Mauritius. For this purpose, the company must obtain the Mauritian residency certificate from the local government. This will now be granted only if certain stringent conditions are complied with and mere incorporation of the company in Mauritius would not be enough.
A certain level of activity will have to be carried out in Mauritius and the company must have a full-fledged office with adequate number of employees having regard to the scale of its operations. Further, board meetings should be held in Mauritius and the overseas directors must be physically present in that country to indicate that all business decisions are taken in Mauritius and not from outside the country.
In short, the control and management of the company should be in Mauritius so that the benefit of the IndoMauritian treaty can be availed of when shares and securities are sold in the stock market. If these conditions are fulfilled, the capital gains would not be taxable in India. Q: I am planning to visit India soon. I want to know whether I should carry substantial cash or whether my credit and debit cards will be widely accepted in India for normal transactions. A: In the larger cities and other urban areas, most of the merchants are accepting debit and credit cards. The number of point of sale (PoS) terminals has doubled from 1.5 million in November 2016 to 3 million at the end of November 2017. According to recent data from the Reserve Bank of India, both the number and value of PoS terminals have increased dramatically, indicating that consumers have migrated rapidly to cashless transactions.
As of November 2017, the number of PoS transactions has increased to 271 million. The value of these transactions is Rs365.19 billion. Most merchants in cities and urban areas are accepting digital payments because there has been a drop in the merchant discount rate for traders and shopkeepers. Businessmen are also accepting digital payments through debit cards and credit cards because, in respect of such transactions, their taxable income under the income-tax law is presumed to be only 6 per cent of the turnover, whereas for transactions in cash, the presumed income is deemed to be 8 per cent of the turnover. The writer is a practising lawyer specialising in tax and exchange management laws of India. Views expressed are his own and do not reflect the newspaper’s policy.