In an effort to increase the trend of Digital Transactions in the country, all cash withdrawals exceeding Rs.50,000 in a day shall be taxed, as per the report submitted the committee formulated by the government.
Tax on Withdrawals formulated by the Committee
A high-level committee on digital payments has suggested a tax to discourage cash transactions, a cap on the maximum allowable limit for large-size cash transactions and a complete abolition of charges on card payments to incentivise digital transactions.
Some of these recommendations of the Chandrababu Naidu-headed committee of state chief ministers could find a mention in the upcoming Union Budget on February 1.
The recommendations seek to make digital transactions more cost effective and attractive than cash transactions. The committee has suggested a banking cash transaction tax on transactions of Rs 50,000 and above.
The panel wants a cap on large cash transactions but has not mentioned any threshold. The committee also wants the merchant discount rate (MDR) — the charge levied on transactions, to be abolished.
“We are confident that our recommendations will be incorporated in the Budget,” Naidu, the chief minister of Andhra Pradesh, said while briefing the media after submitting the interim report of the committee to Prime Minister Narendra Modi on Tuesday.
Identifying the key stakeholders responsible for implementing its recommendations, the committee has asked the finance ministry to curb the use of cash for large transactions. “Consider levy of banking cash transaction tax (BCTT) on transactions of Rs 50,000 and above,” the committee said.
“Consider cap on maximum allowable limit of cash in all types of larger ticket size transactions,” it further said without suggesting the cap limit.