Nirmala Sitharaman presented her vision for tax collection by citing the Purananooru, a 2,000-year-old Tamil poem, to drive home the point that if the government becomes too aggressive in collecting taxes, it will inflict higher damage compared with what it can do with a judicious approach.
Among the many schemes introduced was a 2 percent tax-deducted-at-source for cash withdrawals above Rs 1 crore to discourage businesses from paying in cash and to encourage cashless transactions.
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The use of tax deducted at source to discourage use of cash and track cash-flow is a “smart idea”, said Sudhir Kapadia, partner and national tax leader at EY India, told BloombergQuint in an interaction. “If there's a TDS, you have to reclaim it as a withdrawer of cash and that is a different way of tracking cash.”
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He said the government in 2005 had introduced the banking cash withdrawal tax to track the source of money and check the trail of cash. However, that was quickly given a “quiet burial” due to issues of reporting which the banks had to do, he said. “They have brought it back through a TDS mechanism and if it gives a trail, and if the compliance requirement isn't too onerous, it seems to be a smart idea.”
Does the fineprint of the Finance Bill live up to its fabled wisdom? Watch the full interaction here:
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