Govt considering cash tax to promote digital transactions

Tax Administration Reform Commission also recommended reintroduction of banking cash transaction tax

The government is weighing the pros and cons of the proposal, which could be a tweaked form of the earlier banking cash transaction tax under the United Progressive Alliance government, under which tax will be levied on cash withdrawals above a certain ceiling from bank accounts, a government official familiar with deliberations on this matter said. 

“A number of steps are under discussion,” the official said. The aim of the new tax is to shrink the scope of cash economy and encourage digital transactions".

The Tax Administration Reform Commission (TARC), headed by Parthasarathi Shome, had also recommended the reintroduction of banking cash transaction tax (BCTT). TARC had also noted that currently there is no instrument that captures details of cash withdrawals from bank accounts, other than savings accounts data. 

Digital payments transactions in December last year were 43% higher than in November and totalled 958 million, according to central bank data, reported the Economic Times.