 "People to deposit and exchange 500 and 1,000 currency notes")
Government may also consider to impose a limit on cash holding which could be Rs 15 lakh or above, said a senior official with direct know.
The announcement would be made in the upcoming budget slated to be early this time, perhaps on February 1.
Citing the SITs recommendations, official said, "Aiming to unearth several cash transaction especially gold and property buying in all cash-deals, reasonable restrictions on cash transaction and fixing the limit of cash holdings are under consideration."
This will encourage making more usage of plastic money and discourage people to deal in unaccounted funds," he said.
Accordingly, income-tax act provisions required to be amended with certain exemptions. For instance, any person/industry if requires holding more cash, they may seek approval from income-tax department of that jurisdiction, explained official.
Tax experts view this as an effective move if it could be implemented with all checks and balances. "On the economy where average transaction is between Rs 5 lakh and Rs 10 lakh, the Rs 3 lakh corpus will be very effective. It would be strong deterrence to large section of people which itself is a good achievement and will definitely have a salutary impact.
However, while imposing the restrictions checks and balances are important for better implementation. Also it is required some exceptions in the rule as there are areas where cash is necessities especially in agri-based economy," said Sudhir Kapadia, partner & national director, (tax & regulatory services).
According to SIT, the limits on cash transactions would discourage white collared criminals or harden criminals from money laundering and dealing in unaccounted black money. This would also discourage corruption to some extent. Maybe that corrupt persons would find out ways and means by accepting the gold or ornaments or constructed premises.
However, it would prevent to a large extent funding of terrorism and organized crimes and transferring unaccounted money from one destination to other through Angadias or by any other method, SIT had said in its fifth report on black money.
Citing the several instances of unaccounted cash, SIT highlights sectoral seizures made by tax department during the financial year 2015-16.
According to it, tax department had seized cash of Rs 53.69 crores in the cases of persons mainly engaged in medical & education sectors. While the total undisclosed income admitted by the assessees concerned during the searches amounted to Rs 607.78 crores.
Income-tax data suggests that total cash seizure was Rs 514.30 crores for the year 2013-14; Rs 518.55 crores for the year 2014-15; and Rs 470.89 crores for the year 2015-16.
The government has already initiated several steps, including demonetization of Rs 500 and Rs 1,000 currency, cash advance of more than Rs 20,000 for property transactions.
The SIT had suggested these citing examples of countries such as France and Italy, that allow transactions up to a certain limit.
