The banking cash transaction tax (BCTT) is a type of direct tax levied on withdrawal of cash more than a specified limit from bank. It was first levied in 2005 and then rolled back in 2009. The limit is decided by the government. There have been talks of restoring BCTT and the argument in its favour is that BCTT will promote digital transactions and revenue generation for the government.
When BCTT was introduced in 2005 by the United Progressive Alliance (UPA) government of the time under the Finance Act, 2005, the rate of tax was set at 0.1 per cent. However, BCTT was not applicable in the state of Jammu and Kashmir. In the UPA-I era, BCTT helped the government trace tax evasion and frauds. The same can be true for the incumbent government if it decides to levy this tax. The flip side, however, is that any such tax adds to the burden of the customer and may receive a backlash.
Benefits of Banking Cash Transaction Tax (BCTT)
* It will be a positive step against Black Money, as all currency denominations above a certain amount would be scrapped and it would force Black Money hoarders to switch to electronic methods of transaction. And with electronic transactions, a tax would be deducted straightway with every transaction at a nominal rate. It will drastically reduce the scope of hoarding cash wealth and evade taxes using the loopholes of Tax Laws.
* It will bring a large number of people under the taxation ambit.
* BCTT will help in achieving governments of making India a Cashless Economy.