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India Introduces Banking Transaction Tax

by Lorys Charalambous, Tax-News.com, Cyprus

03 June 2005

A banking transaction tax on cash withdrawals and receipts of term deposits in banks went into effect in India as of June 1.

The tax, proposed in the Union budget for 2005-06, is levied at 0.1% and will apply to withdrawals of R25,000 (US$570) and above on a single day from current and other non-savings accounts for individuals and Hindu Undivided Families.

For business accounts, the 0.1% tax is applicable on any withdrawal above R100,000 during a single day.

The tax will also cover the central and state government accounts being maintained with scheduled commercial banks such as the Indian Railways in the Delhi Transport Corporation.

According to Finance Minister P. Chidambaram, the tax will help to reduce money laundering and financial crime by laying a more visible paper trail back to the initial criminal transaction.

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