0.1 per cent tax on withdrawals: Will it curb black money?

0.1 per cent tax on withdrawals! Will it curb black money?

When the finance minister spoke about a 0.1 per cent tax on withdrawal of cash of Rs 10,000 or more from banks or ATMs on a single day, there was an uproar in Parliament.

Probably, everyone watching the Budget on television simultaneously groaned too.

While Chidambaram claims that it is a method to curb black money transactions, there is a lot of ambiguity surrounding it.

First and foremost, he has not distinguished between individuals and corporates. Corporates would definitely need to withdraw such amounts on a periodic basis.

Secondly, it will be more inconvenient for individuals. ATM limits are around Rs 10,000 per day. Now all they have to do is withdraw the amount in two days if they want to want to avoid tax. And why not? After all, why should you pay tax on your own money which you are withdrawing? And it is money on which you have already paid tax, in any case!

And for those who take out transaction slips for every withdrawal, well, the banks will find this more expensive in the long run. A single transaction is now two!

The finance minister justifies it as a measure to curb the circulation of black money.

Here's how it will work. Let's say a builder demands Rs 1 million (Rs 10 lakh) as black money from a potential buyer. This buyer will have to withdraw the money from his bank account to make that payment. He will have to make a payment of Rs 1,000 on it.

Hopefully, this will work as a deterrent. Appears small but this is targeted at huge amounts. All said and done, it will not go a long way in curbing the black market. Just make it a little more inconvenient.
I just can't believe this!
Neal said:
0.1 per cent tax on withdrawals! Will it curb black money?

I just can't believe this!
I just can't believe this too but I'm not too perturbed though. Makes no sense to me also to encompass individuals & Corporates in the same bubble. Like you said, I'll also make my ATM withdrawals piece-meal. There are other ways too to get more than 10K into your pocket from your OWN funds in the banks on a single day. That I'll not discuss here now. You can bet the builders & the financiers & the traders & the ...... will soon work out ways to at least partially overcome this hurdle. As you said again, this proposed move will only go a small way to reduce the BM in circulation. I could be drastically wrong here because I know I'm going against what the revered Economist Dr. Manmohan Singh thinks. Or does he? I'm not too sure. I can't help feeling there is a red (Leftist) shadow clouding his super-fine judgement.

Most importantly, today's was only the budget proposal. There'll be many a slip between the cup & the lip and many a pot shot taken at these proposals. The show actually begins now. Let's see how things shape up down the road & get back to this subject when it comes down to the brass tacks. Between now & the actual budget presentation are many a bridge to cross like the stormy budget discussions in Parliament, bullets from the Left, arrows from the Corporate circles, discreet nudges from within the Govt. alliance & God knows what else. So let's just wait & see. The Markets did'nt wait today though to react. They just zoomed up on partially good news. Tomorrow the euphoria will die down I think & reality will dawn. Then onwards we can hope to see some sanity & a more sombre reaction by the Markets. At least that's what my humble opinion is. Events of the ensuing days will prove me wrong or otherwise. :cool:


Active Member
This is impractical and has been criticized everywhere. It open's a pandora's box for corruption. Hopes the finance minister withdraws this withdrawal tax or we might have to withdraw our withdrawals.

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