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Now, cash transaction tax

By Our Special Correspondent

NEW DELHI, FEB. 28. If there is one "innovative" proposal in the Finance Minister, P. Chidambaram's budget package for 2005-06, it is the banking cash transaction tax, ostensibly introduced to check tax evasion and stem the generation of black money.

According to the proposal, any cash withdrawal of Rs. 10,000 or more by any person on a single day from any scheduled bank will attract tax at Rs. 10. Similarly, any purchase of bank draft or a banker's cheque worth Rs. 10,000 in lieu of cash deposit of a like amount will also attract the levy. Not just that. Even a receipt of cash on encashment of a term deposit by the concerned depositor will attract the same tax of Rs. 10.

Tax trail

The new levy on withdrawal of your own funds from a bank account may sound peculiar but Mr. Chidambaram was at pains to explain at a press conference here later in the day that the objection being voiced was not against the levy of the paltry sum but the "tax trail."

The Minister sought to defend the levy saying that on any given day, lakhs of rupees are withdrawn from banks and they disappear without leaving any trace. In place of an amnesty scheme, the move, he said, was to put a check on tax evasion and this was the Ministry's initial effort to stem the generation of black money as such huge drawals generally found their way into the unaccounted stream.

The basic objective, Mr Chidambaram said, was to change the system of banking from cash transactions and induce the people to a "cheque economy."

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