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FM may roll-back tax on cash withdrawal

March 01, 2005 20:40 IST

With mounting pressure from within the United Progressive Alliance and outside, Finance Minister  P Chidambaram may partially roll back the proposed Banking Transaction tax of Rs 10 on withdrawal of Rs 10,000 cash and the Fringe Benefit Tax on perks.

Though Chidambaram defended the banking transaction tax as an "anti-black money" measure rather than a revenue raising measure, he gave enough indication on Monday that the government was open to revising the tax amount. There are reports that the cash withdrawal amount may be raised to Rs 50,000 from the proposed Rs 10,000 liable for the banking transaction tax of Rs 10 to prevent harassment to honest taxpayers and depositors.

At an interaction with economists in New Delhi, when asked about the proposed Fringe Benefit Tax on perks, he said, "These are our proposals and suggestions, which are broadly accepted. We will go into them one by one. But if you point out that there are some things to be cleaned up, we will certainly look into it."

"Large amount of cash is withdrawn for ostentatious purposes and it disappears into a black hole. The idea behind the Rs 10 tax is to keep a tax trail," he said.

"I am more amused than concerned. It is not intended to be a revenue raising measure but an anti-tax evasion measure," he said. Nobody is being penalised through this measure, he said but added, "I will go by what Parliament decides on this."

The finance ministry also clarified that the proposed tax would come only after the passage of Finance Bill and not from March 1 as feared in certain quarters.

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