"BANKING CASH TRANSACTION TAX (BCTT)"
For SBI PO-RRBs-IBPS PO/ Clerk
Depending on the results of the drive till 30 December, one of the very drastic options before Narendra Modi could be to scrap income tax from 2017-18 and replace it with Banking Transaction Tax (BTT) from 1 April, 2017. The Committee of Chief Ministers on Digital Payments has recommended the restoration of Banking Cash Transaction Tax (BCTT). This committee washeaded by Andhra Pradesh Chief Minister Chandrababu Naidu. It was recommended by the Committee in order to promote digital payments in the country.
- A banking cash transaction tax (BCTT) could be levied on cash withdrawals of Rs. 50, 000 and above.
- The tax on cash transaction will encourage people to opt for digital payment method, which has been stated to be one of the main reasons for controversial demonetization.
- It is a type of Direct Tax which was levied (from 2005 to 2009) on cash transactions exceeding a specific amount from the bank by a customer.
- The banking cash transaction tax is not a new idea, in 2005 Finance Minister P Chidambaram had first brought 0.1 per cent levy on "withdrawal of cash on a single day of over Rs 10,000 or more from banks and it was roll back on 1st April, 2009.
- Tax Administration Committee headed by Parthasarathi Shome had also recommended reinstating the BCTT in 2014.
- The speculations of Emplacement of Banking Cash Transaction Tax and Fringe Benefits Tax received credence after the National Securities Depository Limited (NSDL) provided BTT as one of the web links on its official website.
Effects of BCTT:
- Tax would be charged on payments through cheques, as well as cards.
- Tax to be imposed on all forms of banking transactions – debit and credit;
- If implemented, BTT could bring large number of people under taxation ambit.
- Advocates of BTT widely suggest a taxation rate of 2 per cent.
- Proponents of BTT claim that the taxation mechanism would lead to the abolition of Income Tax.
Benefits of BCTT:
- BCTT will help in achieving governments of making India a Cashless Economy.
- It will bring a large number of people under the taxation ambit.
- This is being looked at to discourage people from withdrawing cash. If the transaction is done electronically or digitally, there would be no tax. Therefore, people would be inclined to do more of electronic and digital transactions.
- Taxes on goods could be brought in line with the proposed GST rates.
- Under the taxation mechanism, the employers had to pay taxes on the expenses made for employee’s accommodation, travel, entertainment, welfare, recreation, etc.
- BCTT also helped the (tax) department in detecting bogus bills, dummy firms, artificial loss claims, and accommodation entries therefore; he mentioned to continue the BCTT for some more time.
- It will be a positive step against Black Money, as all currency denominations above a certain amount would be throw away and it would force Black Money hoarders to switch to electronic methods of transaction.