Mumbai: In a bid to discourage business payments in cash, Union finance minister Nirmala Sitharaman on Friday proposed to levy Tax Deducted at Source (TDS) of 2 per cent on cash withdrawal exceeding Rs 1 crore in a year from a bank account. According to experts, this will enable wider use of electronic payments, a high-priority area for the government in wake of the demonetisation exercise and clamp down on tax evaders. But having said that, this increases compliance burden on banks and pointed out that account holder could transact with multiple banks for such cash withdrawals to evade the TDS, as the proposed limit seems to be restricted to an individual bank.
Ms Sitharaman also reiterated full tax rebate for individuals with net taxable income up to Rs 5 lakh. ”Let me recall and reiterate this government’s effort over the past five years to alleviate the tax burden on small and medium income earners.
This includes self-employed as well as small traders, salary earners, and senior citizens. Only when their annual taxable income exceeds 5 lakh, they are required to pay any I-T,” Ms Sitharaman said.
In a separate move, the government also announced the interchangeability of the PAN and Aadhaar cards. PAN number was the only number used earlier to file returns, with the linking with Aadhaar being mandated a couple of years ago. There are 120 crore Aadhaar numbers in the country. The move to use Aadhaar number for filing returns is expected to ease the tax-filing process.
With this move, ITR can be filed without PAN by quoting just the Aadhaar.
Suresh Surana, founder, RSM Astute said, “The introduction of the 2 per cent TDS is intended to curb flow of cash in the economy and could have more impact on the unorganized sector which generally is cash dominated. This measure has cast more responsibility on the banks (including co-operative banks).”
