The document proposes introducing a digital transaction tax in India to maximize benefits for all stakeholders. It outlines problems with the current taxation system, including low tax compliance. The proposal suggests taxing digital payments at 2% to generate additional tax revenue for the government while reducing burden on taxpayers. Models for taxing buyers and merchants are presented. The potential benefits of the new tax regime include automated taxation, increased tax revenue for the government, and ease of business. Concerns are acknowledged and further discussion is welcomed.

1. Digital
Transaction
Tax -
Maximizing
benefits
for all
Bharath
Kunjibettu

2. Problems with
current taxation
System
•Time wasted on ITR submission
and proof submissions
•Only around 6% to 7% of the
Indian population pay taxes.
•High Net Worth Individuals
(HNIs) are relocating to other
countries due to complex
taxation in India.
•Requires a Chartered
Accountant’s assistance to file
multiple income source ITR.

3. Stakeholders and
Goals
Stakeholders
• Taxpayers
across Business
and Job
Communities
• Government
of India
Goals
•Automated
Taxation
•Reduced
taxation for
taxpayers
•Increased
Revenue for
Government

4. Some verified facts
from Financial Year
2021-2022 data
•The Indian government has
managed to collect
approximately 17.65 lakh
crore rupees only in Net
Direct and Net Indirect taxes
combined.
•The Digital transaction in
India was approximately
worth 3,021 Lakh crore
rupees.

5. Taxation proposal
considering FY21-22
•If we had considered only 2%
as transaction tax only on
digital payments, we get
60.42 lakh crore rupees
which is approximately
240% growth.
•1 lakh crore = 1 Trillion = 10¹²

6. Digital transaction tax model 1
Buyer Merchant
Buys goods
worth 1000 Rs
Is charged 10 Rs
as transaction tax
Is charged 10
Rs as
transaction tax
Transaction always happens between 2
entities, hence levying 1% tax on each
side could ease the burden of 1 side
taxation
Transacti
on Type -
Location
State Tax
in INR
Central
Governm
ent tax
(INR)
Total Tax
Buyer -
Karnataka
5 5 10
Merchant
- Haryana
5 5 10

7. Digital transaction tax model -2
Buyer Merchant
Buys goods
worth 1000 Rs
Is charged 20
Rs as
transaction tax
A transaction always happens between
2 entities, however here we are levying
2% taxation
Transacti
on Type -
Location
State Tax
in INR
Central
Governm
ent tax
(INR)
Total Tax
Buyer -
Karnataka
0 0 0
Merchant
- Haryana
10 10 20

8. Impact on
Employee Salaries
Example 1
Applying Digital Transaction 1
model

9. Impact on
Employee Salaries
Example 2 with
multiple salaries

10. Impact at a
Company level
salaries

11. Loan/Credit Card
Transaction
Handling (Exception)
•We propose Government to
not tax when a loan gets
sanctioned by banks
•We propose transaction
taxation when EMI is getting
paid
•The same will apply to Credit
Card payments.

12. Cash Transaction
Tax
•In India, tracing cash transactions
proves to be very difficult,
hindering efforts to monitor and
regulate financial activities
effectively, hence it is
recommended to keep only
lower denomination currencies in
circulation.
•Cash Transaction Tax:
Implementing a cash transaction
tax ranging from 4% to 8% on
withdrawals from banks or ATMs
can further incentivize the usage
of digital payment methods.

13. Benefit for Govt
revenue with
FY21-22 data
Details Existing Tax
Regime
Proposed
Transaction Tax
Regime
Net Direct Tax
Collection (in
Lakh crore INR )
8.088 Nil
Net Indirect Tax
Collection (in
Lakh Crore INR)
9.563 Nil
Estimated Digital
Payment
transaction tax (
in Lakh crore)
Nil 60.4
Estimated Cash
Transaction tax (
in Lakh crore)
Nil 1.14
Total 17.651 61.54
Estimated %
Growth in
Revenue
248.5%

14. Sources for
Information
• Sources for Revenue :
https://dor.gov.in/sites/default/files/FIN
ANCIAL%20YEAR.pdf (Reference revenue
document)
•https://pib.gov.in/PressReleaseIframe
Page.aspx?PRID=1897272
Acknowledgements:
• Artha Kranti financial institute as they
coined bank transaction taxation in 2014
but India was not Digitally equipped to
handle transaction tax on the payment
gateway side

15. Expected Benefits
out of transaction
tax summary
•Automated Taxation in every
transaction.
•Splitting this tax 50:50 with
the respective State
Governments can reduce
dependency for funds.
•Ease of business is easily
achievable with this tax
proposal.
•HNI Retention can also be
achieved.

16. What can we ask
Government
•Reversal of ITR Returns: Starting from FY
2017-18
•Digital Transaction Tax: In exchange on all
bank accounts from 2017-18
•Expectation of Acceptance: We aim for full
acceptance of this approach
•Potential Conflicts of Interest:
Acknowledging that this change may raise
concerns for some parties.
•Open Discussion: We encourage you to
comment to address any conflicts.
•Shared Benefit: For Taxpayer and
Government.
•Navigating Differences: We're committed to
finding common ground while respecting
varying perspectives.

17. What can we also
expect
•Expectation of Acceptance: We aim
for full acceptance of this approach,
streamlining tax management.
•Potential Conflicts of Interest:
Acknowledging that this change may
raise concerns for some parties.
•Open Discussion: We encourage you
to comment to address any conflicts
and ensure a balanced solution.
•Shared Benefit: Ultimately, our
collective goal is a fairer, more
efficient tax system for everyone.
•Navigating Differences: We're
committed to finding common ground
while respecting varying perspectives.
•Crucial support : Your proactive
involvement is vital to this journey

18. Banking Facts
as per Internet
•As per sources, there are over
1.1 billion bank accounts
operating in India.
•In the current fiscal year alone,
an impressive 87.2% of bank
accounts were actively
engaged in monetary
transactions, indicating a
significant increase in the
number of individuals
participating.

19. Disclaimer
•The presentation showcased is
a demonstration with
conservative percentage
values applied to the financial
data submitted by the
government.
•These calculations can serve as
a foundational reference for
the government's forthcoming
tax revision process.

20. What can you
do from your
end?
•Share – Create Awareness
about digital transaction
taxation and encourage
more people to identify the
benefits of digital
transactions.
•Write to PM – Please raise
grievances via the Write to
PM portal for both the
Income Tax Department or
the Ministry of Commerce.
Increased grievances on
transaction taxation will
boost government
consideration.

21. How to write a
digital
grievance
•By making use of Chat GPT
and Bard
•Login to any of the above
Webpages and give the
right prompt and context
to highlight the grievance
•Remember more
grievances, more attention
and more chances of
resolution to this unfair
taxation

22. Thank
You!
After raising grievance in
“Write to PM” portal , you
should see a sample
acknowledgement to
something similar below: