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Sunday, March 13, 2005

Tax on cash from bank

Tax on cash from bank
(Businessline)
T. Banusekar


CHAPTER VII of the Finance Bill, 2005 contains provisions relating to banking cash transaction
tax. This proposed new chapter will be applicable to whole of the country barring Jammu and
Kashmir. This chapter shall come into force with effect from June 1, 2005.

The Bill proposes to levy a banking cash transaction tax on taxable banking transactions at 0.1
per cent of the value of each such taxable banking transaction. The tax shall be payable by:

a person who withdraws cash in excess of Rs 10,000;

a person who buys a demand draft or banker's cheque or any other financial instrument for
payment in excess of Rs 10,000;

a depositor who receives more than Rs 10,000 on encashment of term deposit;

a person who withdraws sums in excess of Rs 10,000 by way of banker's cheques or a similar
exercise by the bearer of such cheques or other financial instrument.

It is also proposed to provide that no banking cash transaction tax shall be payable if the
amount of term deposit is credited to any account with the bank

The value of taxable banking transactions is as follows:


in case of cash withdrawals exceeding Rs 10,000, the amount of cash withdrawn;

in respect of purchase of a bank draft or a banker's cheques or any other financial instrument on
payment of cash exceeding Rs 10,000, the amount of cash deposited;

in respect of receipt of cash on encashment of term deposit, the amount of cash received on
encashment of term deposit.
It is proposed to provide that every scheduled bank shall collect the banking transaction tax at
the specified rate, from every person entering into a taxable banking transaction with the bank.
The bank shall pay to the credit of the Central Government the tax collected during a calendar
month by the fifteenth day of the next month.

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10:57 PM  

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