FM to review tax on cash withdrawals

The government is likely to review the controversial Banking Cash Transaction Tax (BCTT), primarily designed to track black money, and even possibly scrap it in the budget.

Sources said BCTT, under which cash withdrawals above Rs 50,000 by an individual or firm from the savings account of a bank are taxed at 0.1%, could be reviewed as growth rate of cash withdrawals from banks have declined and there is possibility of expansion of transactions under annual information report (AIR) filings.

"As other instruments become more effective, I think it would be possible to review BCTT next year," finance minister P Chidambaram had said while presenting last year’s budget. BCTT was introduced in June 2005.

Industry chambers have asked the finance minister to withdraw this tax in view of the fact that all high value transactions have now to be supported by the Permanent Account Number for the purpose of identification.

Apart from collection of vast information about transactions through AIRs, the income tax department is also collecting information from banks on suspected transactions under the Prevention of Money Laundering Act.

Sources said an alternative before the finance minister could be to bring high cash withdrawals, say above Rs 50,000 under the purview of AIRs. The minister had earlier said that transactions under the AIRs would be expanded at an appropriate time.

Meanwhile, opposing any move to withdraw BCTT, the income tax department argued since it is scrutinising only 1-1.5% of over three crore tax returns filed annually besides about 350 investigations and around 10,000 surveys, the BCTT should be retained to track black money.

Till January 31, revenue collections from the BCTT touched Rs 460 crore, compared to Rs 401 crore a year ago, registering a growth of 14.5%.

Source : TOI