Budget 2017: Arun Jaitley bans cash transactions above Rs 3 lakh

By imposing a cap on cash transactions above Rs 3 lakh, the government has accepted recommendations of a Supreme Court-constituted Special Investigation Team (SIT), which had in July last year proposed such a measure.

“No transactions above Rs 3 lakh should be permitted in cash. The government has decided to accept this suggestion,” Finance Minister Arun Jaitley said in his budget speech. The government will be required to make this change through the finance bill.

But Jaitley did not say whether the goverment intends to accept the SIT’s other sugestion—a cap on cash holding of Rs 15 lakh.

Industry trackers say the cap on cash transactions could be looked as the government's determined push against the parallel economy. ET was first to report about such a change on November 18 and said the government could be looking to introduce such a step in the budget.

"The demonetisation and a cap on cash withdrawal is a very positive step as this can just end the parallel economy as almost no black money would be generated. I see this step as a logical extension of government strategy to attack the black money, and it could have huge positive implications on Indian economy," said Rakesh Nangia, managing partner, Nangia and Co.

Experts say this will help the government’s war on black money and open up another flank and combined with GST, such a proposal could go a long way.