Between a lot of suggestions to incentivize digital transactions, a ‘cash tax’ is being regarded by the government. If the idea is cleared, it may take shape in the February 1 budget.
The govt is evaluating the benefits and drawbacks of the proposal, which might be a modified form of the previously financial cash transaction tax within the United Progressive Alliance government, within which tax will be imposed on cash withdrawals over a specific ceiling from bank accounts, a govt official acquainted with deliberations on this matter said.
“A number of steps are under discussion,” the official said.
The goal the new tax is to reduce the opportunity of cash economic system and motivate digital transactions.
The govt has brought a sequence of actions since demonetisation in November last year to incentivise digital transactions. The ultimate call will be taken “at the highest political level”, one official said.
The Special Investigation Team (SIT) on black money has by now suggested a ban on cash dealings above Rs 3 lakh and a Rs 15 lakh limit on personal cash holding.
The Tax Administration Reform Commission (TARC), headed by Parthasarathi Shome, had also suggested the reintroduction of banking cash transaction tax (BCTT). TARC had also observed that presently there is no instrument that catches information of cash withdrawals from bank accounts, other than savings accounts data. Digital payments dealings in December last year were 43% higher than in November and totalled 958 million, according to central bank data.