Withdrawing Rs 10 lakh cash a year? govt plans to tax you!

Withdrawing Rs 10 lakh cash a year? govt plans to tax you!

The proposal comes ahead of the full-year Union Budget, which will be presented by Union Finance Minister Nirmala Sitharaman on July 5 next month.

In a bid to encourage paperless economy and digital transactions, the Narendra Modi government is planning to introduce a special tax on those withdrawing Rs 10 lakh cash in a year. According to a Times of India report, the Centre is likely to introduce the tax along with mandatory Aadhar authentication for every single high-value transaction. At present, every individual is required to give the PAN details for deposits of Rs 50,000 and above. The proposal comes ahead of the full-year Union Budget, which will be presented by Union Finance Minister Nirmala Sitharaman on July 5 next month. In its second term, the Modi government is also considering levying the estate tax on inherited property in line with global practices, a Business Standard report said.

Last week, the Reserve Bank of India had introduced elimination of charges for RTGS and NEFT transactions in both public and private sector banks, followed by its monetary policy June 2019 meeting. Addressing a press conference after the Monetary Policy Committee's meeting in Mumbai, RBI Governor Shaktikanta Das said, "RBI levies minimum charges on banks for transactions routed through RTGS and NEFT system for other fund transfers.  Banks, in turn, levy charges on their customers".

"In order to provide an impetus to digital funds movement, it has been decided to do away with the charges levied by the RBI for transactions processed in the RTGS and NEFT systems," Das added. "Banks will be required, in turn, to pass these benefits to their customers. Instructions to banks in this regard will be issued within a week," the Governor of the central bank said.

NEFT or National Electronic Funds Transfer works on a deferred net settlement basis, wherein transactions are lined up and settled in batches. Only the amounts below Rs 2 lakh can be transferred using NEFT services. Earlier, customers had to shell out a certain amount to avail the NEFT facility, which used to vary based on the amount of transfer.

RTGS or Real-time gross settlement, on the other hand, typically used for high-value transactions like Rs 2 lakh and above that require an immediate and more secure clearing within the same day of submission. It takes place from one bank to any other bank on a "real time" and on a "gross" basis. The charges levied for RTGS transactions used to vary depending upon the time of request.

As of now, country's largest bank SBI charges between Re 1 and Rs 5 for transactions through NEFT and between Rs 5 and Rs 50 for RTGS route.