In a bid to incentivise digital transactions and discourage large withdrawals, the Narendra Modi government is considering a proposal to impose cash tax in the upcoming Union Budget.
The government may tweak an earlier banking cash transaction tax under the United Progressive Alliance government, under which tax will be levied on cash withdrawals above a certain ceiling from bank accounts, Economic TImes reported quoting its sources in Finance ministry.
The Special Investigation Team (SIT) on black money has already recommended a ban on cash transactions above Rs 3 lakh and a Rs 15 lakh limit on individual cash holding, the ET report said.
An official was quoted as saying that the final call will be taken at the “highest political level”, while another said there was good chance the measure could be introduced in the February 1 Budget.
According to Reserve Bank of India data, digital payments transactions in December last year were 43 percent higher in December than in November since the government devalued popular bank notes.
