Government of India is considering introduction of tax on cash withdrawal on persons who withdraw more than Rs 10 lakh in a year. Government is also mulling implement ation of an Aadhaar based authentication for high-value cash withdrawals.
Cash transaction tax is being introduced to encourage digital payments and discourage cash transactions. Government may announce the such measures in the upcoming Budget as well.
As per media reports, tax on cash withdrawal will be introduced on persons who withdraw more than Rs 10 lakh in a year and implement an Aadhaar based authentication for high-value cash withdrawals. While the proposed tax on cash withdrawals would discourage transactions in cash, the authentication process based on unique identification number such as Aadhaar would help in tracking those undertaking high-value transactions in cash.
It will be similar to Banking Cash Transaction Tax (BCTT) was introduced in the Finance Act, 2005 with effect from June 1, 2005.