Government Mulls Tax On Annual Withdrawal Exceeding Rs 10 Lakh To Promote Digital Payments

In a bid to promote use of digital payments for all manner of transactions and discouraging the use of paper currency, the government is looking at a possibility for introducing a tax on cash withdrawal of Rs 10 lakh in a year, reports Times of India.

According to the report, the government is also mulling on a proposal mandating Aadhar authentication for all high-value cash withdrawals. This, the government believes, will make it easy to track individuals and tally tax returns.

“A MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) beneficiary needs to authenticate receipts using Aadhaar but someone withdrawing Rs 5 lakh need not do so as things stand,” an official was quoted in the report as saying.

The government reportedly is of the view that annual cash withdrawals of over Rs 10 lakh are not needed for most individuals and businesses.

As per the report, the discussions come ahead of the budget that is to be presented on 5 July. However, the move has not been finalised, government sources were cited in the report as saying.