New Delhi, June 10: In a bid to curb the use of black money and encourage digital transactions, the Modi government may introduce a cash withdrawal tax. The government is considering a proposal of imposing a tax on those withdrawing Rs 10 lakh in cash a year. The development comes ahead of the Budget that is to be presented on July 5. The government is also clear that it does not want to increase the burden on the middle class and the poor with excessive compliance.
"Why should someone withdraw over Rs 10 lakh for cash transactions when digital payments are being encouraged?" a government source was quoted by Times of India as saying. The government also believes that most individuals and businesses don't require annual cash withdrawals of over Rs 10 lakh. Another proposal that is being considered is mandating Aadhaar authentication for all high-value cash withdrawals.
The UID authentication and OTP will ensure that Aadhaar numbers are not misused, said the report. At present, if you are withdrawing Rs 50,000, PAN is a must. "A MGNREGA beneficiary needs to authenticate receipts using Aadhaar but someone withdrawing Rs 5 lakh need not do so as things stand," an official said. Last week, the Reserve Bank of India (RBI) announced to scrap charges on transactions conducted through RTGS and NEFT.
A decade ago, the Congress-led UPA government had introduced bank cash transaction tax. However, the government was compelled to withdraw it a few years later after an uproar. In late 2016, a high-level panel of chief ministers, headed by then Andhra Pradesh CM N Chandrababu Naidu, had called for the reintroduction of a tax on cash withdrawals of over Rs 50,000.