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Government plans to revive tax on cash transaction in bank

The Narendra Modi government in its second term will put in place measures to further curb black money generation.

According to sources, polic-makers have started talks on the possibility of re-introducing the much-played instrument of the banking cash transaction tax (BCTT) to discourage cash transactions.

Further, the tax authorities are considering levying the estate tax on inherited property in line with global practices.

“We have received suggesstions on taxing cash transactions. The departments concerned are examining the feasibility and effectiveness of the tax. Such tools are not for revenew generation but to curb black mondy transactions in the form of cash,” said a senior govenment official in the know.

The matter is being discussed and it has been taken up in some of the pre-Budget consultation meetings. This could take shape only after the new government is formerd and the finance minister is appointed, he added.

Sources said there was a possibility that the modalities of this tax would be different from what had been seen earlier.

P Chidambaram as finance minister, imposed this tax effective from June 1, 2005, but was withdrawn on April 1, 2009, because th tax department had many other instruments to nab those having black mondy. Back then, this was imposed at 0.1 per cent of cash withdrawl other than from savings accounts. It was imposed on any individual or Hindu Undivided Family withdrawing at least Rs 50,000 or an entity taking out at least Rs 1 lakh in cash.

In 2007, a committee of chief ministers is learnt to have suggested the restoration of the BCTT to encourage digital payments. The government has been nudging people to do digital payments. The idea behind this is not generation revenue but curbing black money transactions, said a tax expert.

Courtesy - Business Standard

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