Withdrawal tax ceiling may go up to Rs 25k

NEW DELHI: The threat of tax on every Rs 10,000 withdrawn is getting whittled down. The government is likely to make a distinction between individuals and businesses while raising the ceiling on the cash withdrawal tax. The ceiling is proposed to be hiked to Rs 25,000 for individuals and Rs 1 lakh for businesses. Companies or firms will have to pay a 0.1% tax on withdrawals of Rs 1 lakh or more, if the finance ministry's proposal is passed in Parliament. Businesses operate current accounts where no interest is paid on deposits. A higher ceiling of Rs 1 lakh is being proposed for businesses since amounts exceeding Rs 10,000 are likely to be withdrawn on a single day to meet business expenses such as payment of salaries. The Budget has also proposed allowing assesses to claim a deduction - of the amount paid as banking cash transaction tax - against their business income. In the amendments to the finance bill, the government may propose two threshold limits, one for individuals, and the other for non-individuals (or businesses). This is distinct from the original Budget proposal which seeks to impose a 0.1% tax on cash withdrawals by a person holding any account, be it savings or current account. The middle class normally deposits salary in savings accounts which are then withdrawn to meet monthly expenses. Finance minister P Chidambaram proposed the new levy as an anti-tax evasion measure, given that large cash withdrawals leave no trail right now. As per the original provisions of the finance bill, the tax will have to be paid on cash withdrawals 'by whatever mode' exceeding Rs 10,000 on a single day by a person from any scheduled bank. It also covers withdrawals by bearer cheques. Those purchasing a bank draft or a cheque or any other financial instrument by paying cash of over Rs 10,000 on a single day will have to fork out the levy. The tax will have to be paid on encashment of a term deposit, again exceeding Rs 10,000 on a single day. However, the government has been under political pressure to reconsider the levy. Although raising of the threshold exemption would mean a partial dilution of the Budget provisions, it would still serve the government's objective of keeping a trail.

Withdrawal tax ceiling may go up to Rs 25k

The government is likely to make a distinction between individuals and businesses while raising the ceiling on the cash withdrawal tax.

More from our Partners

Popular Categories

Hot on Web

In Case you missed it

Top Searched Companies

Latest News

Download ET APP

Follow us on

become a member