The banking cash transaction tax has been introduced as a special scheme to unearth black money. It has been proposed as measure to check tax evasion. The government is concerned about large cash transactions, especially withdrawal of cash when there is no ostensible purpose to withdraw such large amounts of cash. These cash withdrawals leave no trail and presumably become part of the black economy. The banking cash transaction tax enacted as per Chapter VII of the Finance Act, 2005. This new chapter is proposed to applicable to the whole of India except the state of Jammu and Kashmir. This chapter came into effect on June 1, 2005. This is an independent levy proposed under Chapter VII and being regulated by income tax authority.
The levy of tax under this chapter is proposed on every person as defined in section 2(31) of the Income Tax Act and also on an officer or establishment of the central or state government. The Finance Bill clause 95(1) proposed to levy a banking cash transaction tax on taxable value of banking transaction at the rate of 0.1% without surcharge and education cess. Every taxable banking transaction entered into on or after June 1, 2005 shall be subject to banking cash transaction tax. This tax covers not only the persons specified in Section 2(31) of the Act, but also covers all offices or establishments of central and state governments as per Section 94(5) of the Finance Act, 2005. For this purpose, the words and expressions not defined in Chapter VII will have the same meanings as defined in the Negotiable Instrument Act 1881, RBI Act 1934, Banking Regulation Act, 1949, the Income-Tax Act 1961, and rules and regulations made under these Acts.
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