Tax on cash withdrawals may stay
The Government is likely to retain tax on bank cash withdrawals in the upcoming Budget.
New Delhi: The Government is likely to retain tax on bank cash withdrawals in the upcoming Budget despite strong demands from industrial bodies and some allies of the UPA Government to withdraw it.
According to official sources, the Union Government however, may exempt states from paying this tax while withdrawing money to pay salary to its employees.
The Income Tax Department, which has claimed to have tracked black money worth thousands of crore through Banking Cash Transaction Tax (BCTT), has recommended its retention and to also further strengthen the provisions.
The Government is likely to keep this tax, introduced in 2005, but bring more areas under Annual Information Returns (AIRs), the sources added.
Currently there are seven areas, including cash deposits of Rs 10 lakh a year in a bank, credit card payment up to Rs two lakh under AIRs, which have been used as mechanisms to track high value spenders.
Finance Minister P Chidambaram had said he proposed to continue BCTT for some more time until the AIR system is able to capture all significant financial transactions.
"Although the Government collected merely Rs 404 crore through BCTT till January 31, 2006, it has collected about Rs 357 crore from BCTT by December end this fiscal," a senior income tax official said.
BCTT has proved one of the most effective investigative tools in the hands of Income Tax officials to unearth black money and check the flow of black money in the economy, the official added.