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Finance ministry mulling 3 to 5% tax in Budget on cash withdrawal of 10 lac a year


New Delhi, June 10 (IANS): Withdrawing a cumulative Rs 10 lac a year can attract 3-5 per cent tax if a proposal going around in the Finance Ministry takes shape in the Budget to track high value cash deals and make digital payments mandatory.

In its push towards a digital economy, the central government is thinking of introducing a tax of 3-5 per cent on cash withdrawal of Rs 10 lac in a year, a move to discourage cash usage in the economy and resultant black money.

Paying Rs 30,000-50,000 for Rs 10 lac annual withdrawal will be seen as a loss, the government thinks and feels this will discourage large cash transactions.

Official sources said discussions have been held internally on the fallout of such a move and the tax figure is still being discussed though it won't be less than 5 per cent, said sources adding 3-5 per cent is an appropriate figure.

As a step towards this, earlier this week, the Reserve Bank of India waived the fee currently imposed on banks for using its NEFT/RTGS payment servers. The central government also said it was setting up a panel to review charges imposed by banks on ATM withdrawals. RBI said it was doing so to boost digital transactions.

Another source was quoted as saying, "Why should someone withdraw over Rs 10 lakh for cash transactions when digital payments are being encouraged?". It may be noted that just last week, RBI scrapped NEFT and RTGS transfer charges and the central bank is also reviewing the charges on cards as well.

The proposal is at a discussion level but has found favour for being a step towards a digital economy and tracking transactions. Sources said this is a global practice. Even in Pakistan a withdrawal of more than Rs 50,000 attracts such a tax.

During 2005-2008, the UPA government imposed tax on withdrawals of more than Rs 50,000 from current accounts for detection of unaccounted money in the absence of alternative methods. This tax was applicable only on cash and not on payment by cheques.

During 2015, when the Greek economy was on the verge of bankruptcy, millions of panicked citizens completely cleared their accounts by pulling more than 28 billion euros out of banks and pushing the total cash revenue held in the country's financial institutions to a 10-year low.

A high-level committee on digital payments in 2017, headed by Chandrababu Naidu, the then Chief Minister of Andhra Pradesh, had suggested a tax to discourage cash transactions, a cap on the maximum allowable limit for large-size cash transactions and a complete abolition of charges on card payments to incentivise digital transactions.

The committee had submitted the report to Prime Minister Narendra Modi. It had suggested "considering levy of banking cash transaction tax (BCTT) on transactions of Rs 50,000 and above."

To combat this Greek banks proposed taxing cash withdrawals and requiring use of debit and credit cards for all transactions in order to prevent tax evasion. A surcharge for all cashpoint withdrawals was introduced approximately amounting to 1 euro for every 1,000-euro transaction.

It was expected that it would not impact day-to-day withdrawals and will deter citizens from clearing out their bank accounts.

The Finance Act 2017 prescribed imposing a penalty equal to the transacted amount on those who violated the rule restricting cash transactions. It provides that no one can deal in cash in excess of Rs 2 lakh in a single day, in respect of a single transaction or transactions relating to one event or occasion barring a banking company, post office savings bank and cooperative bank.

To curb large cash transactions and discourage black economy, then Finance Minister Arun Jaitley had in the 2017-18 budget proposed to ban transactions of over Rs 3 lakh a day.

This limit was lowered to Rs 2 lac through an amendment to the Finance Bill 2017 that was later passed by Parliament.

In another related measure, the Finance Act said any capital expenditure in cash exceeding Rs 10,000 shall not be eligible for claiming depreciation allowance or investment-linked deduction. Similarly, the limit for revenue expenditure in cash has been cut to Rs 10,000 from Rs 20,000.

 

Comment on this article

  • ad, mangaluru

    Tue, Jun 11 2019

    After this Modi will perhaps demonetize the monetary system to control corruption and black money.

    DisAgree Agree Reply Report Abuse

  • Sethu, Mangalore

    Tue, Jun 11 2019

    Digital payment systems has lot of pitfalls even to techno-savvy people. On line frauds are rampant where common man do not know whom to approach. Cyber crime cells lacks infrastructure and manpower to deal with complexity of crimes. Funds are blocked for indefinite period even for IRCTC and payments to government portals. On the side, money in bank accounts have already suffered tax once and taxing it again will lead to multiple taxation, a retrogressive measure in a progressive financial system. If the Govt feels that the digital transaction system has the carrying capacity to bear the entire load of transactions, why can't they ban currency transactions in full? Let the Govt bring more respectability to Rupay Cards. Why portals like IRCTC insist online payments through Rupay Cards to be routed through Kotak Bank when they have 24 PSU Banks....? How Google Pay is operating in India even with integration of accounts with banks like SBI without mandatory approval from RBI....? Digital Payment domain is a no-mans land with limited regulation and accountability. Let the system wear the pants first and a neck-tie can be tried later, but not otherwise.....!

    DisAgree Agree [1] Reply Report Abuse

  • J L Mangalore, Mangalore

    Tue, Jun 11 2019

    You all Voted for Modi again right...
    Now enjoy...
    "Andher nagri, Chaupat raja" summons it up....

    DisAgree Agree [3] Reply Report Abuse

  • Dolfus I S Crasta, Bangalore

    Tue, Jun 11 2019

    A day will come you have to pay tax for keeping your money in the Bank as fixed deposit / Savings Bank account. So be prepared.

    DisAgree Agree [2] Reply Report Abuse

  • Mann, Bangalore

    Tue, Jun 11 2019

    Looting comes in different forms with different names. This tax is applicable to you and me not to jay shah type of people.

    DisAgree Agree [6] Reply Report Abuse

  • Surendra Poojari, Mangalore

    Mon, Jun 10 2019

    Where does this tax money goes? Do we have proper roads? All money goes to ministers lavish lifestyle and self advertising including PM's foreign trips. We need statues but we don't need roads. We have money for statues but we don't have money to settle dues of Air India. Politicians enjoying free trips on Air India and it's under loss (highest loss in history). Modi ruined economy in his first term and just see what will happen in second term. Vote for Modi you idiots...

    DisAgree Agree [10] Reply Report Abuse

  • SmR, Karkala

    Mon, Jun 10 2019

    Indian voters do not vote on the basis of development or policies. Finance ministry new tax system on withdrawal is discouraging the withdrawals so that government rolls the money in case budget deficit.

    This is the second successive year that the Reserve Bank will be transferring an interim surplus of Rs 28,000 crore as interim dividend to Modi govt. This is in addition to Rs 50,000 crore surplus transfer announced by RBI in August 2018 for 2017-18 (RBI follows July-June financial year). Of this, Rs 10,000 crore was given as interim dividend to the government on March 27, 2018.

    Despite Rs 80,000 crores of the bailout in less than three years PM Modi government seems to be in bad shape. This, in addition, the government is planning to sell 45 Public sector companies including Air India, BSNL, MTNL.
    If PM Modi government wanted to introduce the proposed Financial Resolution and Deposit Insurance (FRDI) bill that is on hold which has raised concerns among commoners.

    Currently, your deposit in the bank is insured up to a specified limit. According to the 1961 Deposit Insurance and Credit Guarantee Corporation Act, up to Rs 1 lakh of your money deposited in a bank is insured if a bank were to fail.

    Under Section 52 of the FRDI Bill, the rescue body can cancel even the Rs 1 lakh insurance that you get under the current law. In this case, a bank can even declare that they don't owe you any money at all.

    External Debt in India increased to $521200 Million in the fourth quarter of 2018 from $510400 Million in the third quarter of 2018. External Debt in India averaged $272247.79 Million from 1999 until 2018, reaching an all-time high of $ 529685 Million in the first quarter of 2018 and a record low of $96392 Million in the third quarter of 2000.
    Total liabilities of the government has increased by 49% to Rs 82 lakh crore in the last four-and-half years during the Modi government.
    Govt. want LIC deposit to cover bank loss. Citizens deposit in banks at great risk.
    JH

    DisAgree Agree [4] Reply Report Abuse

  • Monty Dotor, Mangalore

    Mon, Jun 10 2019

    If implemented, it will be a good move to curb black money and as a corollaly it will also reduce crime.

    DisAgree [15] Agree [10] Reply Report Abuse

  • Kumar, Kinnigoli

    Mon, Jun 10 2019

    KEEP MONEY IN BANK... TAX..... WITHDRAW MONEY FROM BANK... TAX.... KEEP MONEY AT HOME... ILLEGAL....

    DisAgree [5] Agree [31] Reply Report Abuse

  • Richard, India

    Mon, Jun 10 2019

    WOW, It came sooner than expected.... Preparation to prevent what happened in Greece ! Enjoy !

    DisAgree [3] Agree [19] Reply Report Abuse

  • Abdul Aleem Faroqui, UAE

    Mon, Jun 10 2019

    People voted BJP to teach Pakistan.. who cares for economy..

    DisAgree [5] Agree [30] Reply Report Abuse

  • Jossey Saldanha, Mumbai

    Mon, Jun 10 2019

    Government should understand that we have already paid income tax on this Money ...

    DisAgree [3] Agree [46] Reply Report Abuse

  • RonRon, Udupi

    Mon, Jun 10 2019

    One thing Im sure now..... our economy going collapse,,, fasten your seatbelts my dears..
    Boda Sheera!!!!!

    DisAgree [8] Agree [39] Reply Report Abuse

  • Rakesh, Mangalore

    Mon, Jun 10 2019

    This is what happens when the Economy is managed by uneducated thugs. Increase / Levy taxes to cover the failures of Govt in managing the economy..!!

    Blind Bhakths Enjoy...!!!

    DisAgree [7] Agree [45] Reply Report Abuse

  • Harold Dcunha, Mangalore, Mangalore, India

    Mon, Jun 10 2019

    Those who do not know how to manage economy, only solution by the law makers is charging additional tax.

    DisAgree [4] Agree [43] Reply Report Abuse

  • shalini, udupi

    Mon, Jun 10 2019

    " ..the government thinks and feels this will discourage large cash transactions." ...so tax is the solution for the government for everything.

    DisAgree [1] Agree [39] Reply Report Abuse

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Title : Finance ministry mulling 3 to 5% tax in Budget on cash withdrawal of 10 lac a year


 
 
 
 

 
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