Sri Lanka will introduce India’s Unified Payment Interface (UPI), a revolutionary digital payment move to achieve a cashless economy, which may help to tighten loopholes that have allowed for tax evasion in the island nation.
The UPI will help the public to use their smartphone as a virtual debit card.
In other words, people do not need any cash or card to carry out transactions. They can simply use the smartphone as a debit card and send and receive money through it. The UPI is an interface that allows the user to link more than one bank account in one smartphone app and transfer funds without having to share any account number.
Sri Lanka President Ranil Wickremesinghe will witness the launch of Unified Payment Interface (UPI) services in Sri Lanka and Mauritius along with Prime Minister of Mauritius, Pravind Jugnauth and Indian Prime Minister Narendra Modi on Monday 12 via video conferencing, the Indian High Commission in Sri Lanka said.
“India has emerged as a leader in Fintech innovation and Digital Public Infrastructure. Prime Minister (Modi) has placed a strong emphasis on sharing our development experiences and innovation with partner countries,” the Indian High Commission in Colombo said in a statement.
“Given India’s robust cultural and people-to-people linkages with Sri Lanka and Mauritius, the launch will benefit a wide cross-section of people through a faster and seamless digital transaction experience and enhance digital connectivity between the countries.”
It also said the launch will enable availability of UPI settlement services for Indian nationals travelling to Sri Lanka and Mauritius as well as for Mauritian nationals travelling to India.
Officials at the state-rub Inland Revenue Department (IRD) say the move will help to tax a person at the point of receiving funds or earning income from multiple sources to various bank accounts.
BOOSTS OVERALL TAX REVENUE
According to Indian tax experts, people in India have been rapidly switching to e-wallets due to the various restrictions, limitations, and withdrawal fees in bank accounts.
These digital wallets and UPI transactions are very quick and also save the people from the hassle of carrying cash or a card, they say.
And it can be linked to multiple bank accounts. It is convenient even for those who are not very comfortable with technology.
The UPI saves the taxpayers from paying more taxes, while serving as a foolproof method for tracking transactions and reduces the use of cash which is hard to track.
Electronic transactions also help increase the overall tax revenue of the government.
Local tax experts say tax evaders had used multiple bank accounts under personal names as well as joint bank accounts in the past. They believe the UPI could effectively address the weakness in Sri Lanka’s existing tax collection system with no physical meeting with tax officials. ‘
In India, UPI transactions up to.50,000 Indian rupees are exempt from tax. Any amount exceeding this limit, received through UPI apps or digital wallets, is treated as a gift and taxed as per the provisions applicable to income from other sources. However, if the money received is a repayment of any sum owed to you, it will not be taxed.