Love cash? Taxman to follow your trail

NEW DELHI: The introduction of tax deduction at source (TDS) on cash withdrawals over Rs 1 crore will enable the government follow cash movements and encourage digitisation of the economy.

According to Rajkiran Rai, MD, UBI, the cash withdrawal tax will not hurt corporates that are paying tax as this merely shifts the tax incidence to the source. “There are very few companies that withdraw such large amounts. More than revenue generation, this appears to be aimed at enabling tracking of cash transactions. Unlike in past there is technology to keep track of withdrawals,” said Rai.

Former finance minister P Chidambaram had introduced a 0.1% banking cash transaction in 2005. This was withdrawn in 2009. In her speech finance minister Nirmala Sitaraman said that some business models, where large cash withdrawal is a necessity, are proposed to be exempted. “It is also proposed that the Central Government may notify the persons to whom these provisions shall not be applicable in consultation with the Reserve Bank of India,” she said.

The finance bill specifically exempts government, banks and white-label ATM operators being subject to this tax. This means the government departments like the railways which are large cash users will also be exempt from this tax.