Budget riddle on cash withdrawals: 'Income' tax on 'non-income' -Sambit Saha

-The Telegraph

The obvious question: if the cash withdrawal isn’t designated as “income”, how can you tax it under the “income” tax act?

The Narendra Modi government has left tax consultants and legal eagles deeply puzzled as they try to wrap their heads around the legalese of a change to the income-tax act.

The change, incorporated in the budget presented by Nirmala Sitharaman and amended afresh on Thursday, mandates banks to deduct a 2 per cent tax deduction at source (TDS) on cash withdrawals above Rs 1 crore a year from multiple bank accounts. But, mystifyingly, the cash withdrawn will not be deemed as “income”.

The obvious question: if the cash withdrawal isn’t designated as “income”, how can you tax it under the “income” tax act?

Tax advocates and legal wordsmiths have been poring over the last-minute amendments to the Finance Bill 2019 before it was passed by the Lok Sabha on Thursday to try and make sense out of an apparent absurdity. The new provision comes into effect from September 1.

When the Modi government decided to tax cash withdrawals from bank accounts, it brought back memories of the banking cash transaction tax (BCTT) that was introduced in the Finance Act of 2005 by the then finance minister, P. Chidambaram, to track unaccounted money and trace its source and destination.

Chidambaram had introduced the BCTT on cash withdrawals above Rs 50,000 as a separate chapter in the Finance Act and avoided any legal quibble over the levy.

The BCTT stayed on the statute books till April 1, 2009, when the UPA government decided that it had served its purpose and there were other ways to ferret out tax dodgers and money-launderers.

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The Telegraph, 20 July, 2019, https://www.telegraphindia.com/india/budget-riddle-on-cash-withdrawals-income-tax-on-non-income/cid/1694849?ref=top-stories_home-template&fbclid=IwAR3O97Mg2crAj1RgFf7

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