Soon you may have to pay tax on cash withdrawal of Rs 10 lakh a year

In order to encourage digital transaction and crack down on black money, the Narendra Modi-led NDA government may soon start taxing those who withdraw more than Rs 10 lakh in cash in a year, Times of India reported on Monday.The government may also mandate Aadhaar authentication for all high-value cash withdrawals in order to track individuals and tally tax returns.

Earlier this week, the Reserve Bank of India said it would waive the fee currently imposed on banks for using its NEFT/RTGS payment servers. The central government also said it was setting up a panel to review charges imposed by banks on ATM withdrawals. While announcing the scrapping of charges on RTGS and NEFT transactions, the RBI said it was doing so to boost digital transactions.

Last month Business Standard had reported that the government may also reintroduce the much-flayed banking cash transaction tax (BCTT) to discourage cash transactions while tax authorities are also considering levying the estate tax on inherited property in line with global practices. If implemented, the tax would be on the market rate of the property to be inherited. However, if the value of the property/asset is less than Rs 5 crore, this tax would not be applicable. 

 The BCTT is expected to help taxmen detect bogus bills, accommodation entries, artificial loss claims, and dummy firms.

The BCTT had earlier been imposed between June 1, 2005 and April 1, 2009 under the UPA regime when P Chidambaram was finance minister. It was withdrawn in 2009 because the tax department had many other instruments to nab those having black money.

Back then, this was imposed at 0.1 per cent of cash withdrawal 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.