The Hindu Business Line : PAN may be mandatory for large single-day cash drawals

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PAN may be mandatory for large single-day cash drawals — 'Withdrawal tax' likely to be dropped

Sarbajeet K. Sen

New Delhi , April 10

THE Banking Cash Transaction Tax (BCCT) endgame is getting intriguing. While the tax on cash withdrawals proposed in the Budget could well be dumped, the Ministry of Finance is drawing up a strategy to ensure that those who are using the banking channel to funnel ill-gotten money cannot escape being checkmated.

Among the proposals on BCCT doing the rounds in North Block is to make the production of the individual Permanent Account Number (PAN) mandatory for any cash withdrawals beyond the stipulated limit of Rs 10,000 in a single day. This would be in lieu of the Government's not pressing for the imposition of the proposed tax.

Senior officials of the Finance Ministry said that the proposal also seeks to impose severe restrictions, or even a complete ban, on cash withdrawals over the limit for account-holders who are unable to provide a PAN number.

The Finance Minister, Mr P. Chidambaram, had in the Union Budget for 2005-06, proposed to levy a 0.1 per cent tax on cash withdrawals on a single day of over Rs 10,000 or more from banks. The levy was being proposed as a measure to check the use of banking channels to funnel black money transactions.

The Finance Minister had argued that the imposition of the tax would leave a tax-trail that would help the revenue department to track the end-use of the monies withdrawn "when there is no ostensible purpose to withdraw such large amounts of cash."

The proposed tax had come under heavy flak from all quarters including political parties that had sought the withdrawal of the tax during the debate on the Budget in Parliament. The banking sector too had felt that the BCCT would add a huge administrative burden on its staff.

Finance Ministry officials feel that seeking the PAN number in lieu of the tax would forcefully reaffirm that the sole purpose of BCCT was to create a tax-trail for large cash transaction. Mr Chidambaram had taken pains to argue that the BCCT proposal was not a revenue-raising measure.

Officials feel that placing restrictions on withdrawals on accounts where PAN is not available was not unreasonable.

They felt that people below the taxable limit do not normally stack up large amounts of idle money in the saving bank. "People who do not come within the taxable limit normally do not keep large sums in savings account," officials argued.

There have been reports that the Government was also considering the alternative of keeping the Savings Bank account in banks completely out of the BCCT as a measure to soothe the feathers that had been ruffled on account of the proposal for the levy.

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PAN may be mandatory for large single-day cash drawals — 'Withdrawal tax' likely to be dropped