Sep 1, 2008

India - Cash cards come under mandatory reporting of high-value transactions

Prepaid cash cards, which are being increasingly used for transferring cash in India, making utility payments and even playing games online will soon come under the purview of mandatory reporting of high-value transactions.
The Central Board of Direct Taxes (CBDT) is considering a proposal to widen the ambit of the Annual Information Return (AIR) to cover cash cards issued by non-banking financing companies (NBFCs) in the country, official sources said.
The AIR currently covers seven kinds of transactions, including cash deposits in savings bank accounts of over Rs 10 lakh in a year, credit card billing of over Rs 2 lakh a year and purchase of property over Rs 30 lakh.
The companies that issue these cards will now have to mandatorily file information on the purchasers of the cash cards with the tax authorities, who are of the view that these cards are being used to transfer cash and incur expenditure running into thousands of crore.
Based on the risk parameters, the department will pick up cases from the AIR through computer-aided scrutiny system to investigate the source of funds, the recipients and whether taxes have been paid or not. Cash card transactions above a minimum threshold limit will be reported under the AIR.
However, mere inclusion of these cards in the reporting system does not imply any wrongdoing or tax compliance issues. The move is a part of the CBDT’s efforts to widen scrutiny of all high-value financial transactions in the country.
The CBDT may also bring in many other kinds of high-value transactions under the AIR. Officials say countries like Brazil have as many as 40 kinds of transactions under mandatory reporting and point out that India could also do the same.
Unlike in normal banking channels or postal transfers, detailed records of transaction using cash cards are not usually available. Anyone can buy a cash card by visiting the office of the NBFC or asking for a home delivery.
The customer gets a scratch card, which contains a unique number string. This is then communicated to the recipient, who collects cash from a local office by submitting the numbers.
Cards like ItzCash and Done Card are also widely used for making donations, shopping, booking travel and making utility-bill payments. The cards are available in a variety of denominations.
While ITZCash is offered by Subhash Chandra’s Essel Group, Done Card is an offering of Done Card Utility Ltd, a Mumbai-based company promoted by businessman Subhash Jewria, businessman Chirag Shah and lottery king Ketan J Shah.

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