Finance Minister P Chidambaram today sought to dispel the belief that money in banks had nothing to do with black money. Citing examples of huge cash transactions and how banks were being used for money laundering, he said the cash withdrawal tax had been introduced to leave a tax trail. |
"There is a popular misconception that money kept in bank is not tainted. It is naive (to think so)," he said in a reply to an eight-hour-long discussion on the Finance Bill in the Lok Sabha. |
Chidambaram had, in his Budget speech, proposed a 0.1 per cent tax on cash withdrawals of Rs 10,000 or more on a single day from banks. |
He introduced amendments to the proposed regime by exempting savings bank accounts from the ambit of the tax and also raised the withdrawal threshold to Rs 25,000 a day for individuals and Hindu Undivided Families and Rs 1 lakh for others. |
Defending the introduction of the tax while raising the threshold and exempting the savings account, the finance minister said the banking system was the most convenient way of laundering money and that the new tax would leave a tax trial. |
"We want to push the economy into a cheque, credit card and bank transfer economy (instead of a cash economy)," said Chidambaram. |
He said through this tax, the government would try to zero in on accounts with abnormal cash transactions. He cited a specific case involving cash transfers amounting to Rs 32 crore among a set of people who were not tax assessees but had close to Rs 110 crore in their accounts spreading over four cities. |
He said the government had evidence where the money was deposited in one account in one city and withdrawn from another account in another city. |
In another case, a non-income tax payer without a pan card number, had deposited money ranging from Rs 1 crore to Rs 98 crore over a period of a few months and had withdrawn Rs 23 crore to Rs 622 crore in cash. |
He said the Reserve Bank of India had gone into such transactions and had come out with a report on them. The report had also found that banks accepted statements of account holders that they were not income tax assessees routinely without making enquiries even when huge transactions were taking place in these accounts. |
The minister said in view of the criticism, he decided to exempt all savings, taking most of the account holders away from the purview of this tax and also raised the withdrawal limit in other cases. |