New Delhi: The government’s move to unearth black money by keeping track of, and taxing high-value bank transactions has proved so successful that it is seeking to impose penalties on banks that do not share such information with it every month.
Between April 2006 and January 2007, the banking cash-transaction tax (BCTT) generated tax revenue of Rs401 crore as compared to Rs221 crore in the same period the previous year. The tax, and the tracking mechanism, introduced in June 2005, were not designed to boost tax revenue. The government views them as part of its fight against black money. In 2005-06, they helped unearth Rs3,600 crore of black money in Delhi alone. Officials at the ministry of finance’s revenue department said that more black money had been unearthed after BCTT came into effect in cities such as Mumbai.
More than 355 banks across India are covered by BCTT and are required to provide monthly statements of transactions to the government. The Income-Tax Act, though, mandates that an annual submission would suffice. Rules pertaining to BCTT do require banks to submit monthly reports, but some, especially regional rural banks, which operate in small towns and rural areas, have not complied. “There are no penal provisions (in the Act) to deal with banks that do not submit details on a monthly basis,” said an official in the revenue department. The government plans to amend the Act accordingly.
BCTT is a 0.1% tax on withdrawals in excess of Rs25,000 from a current account or encashment of a fixed deposit or deposits. The limit increases to Rs1,00,000 for other entities such as companies. Last year, the government withdrew BCTT on inter-bank transactions and exempted cooperative banks altogether.