Although some of the withdrawals were for genuine business needs, including by cash management companies which manage ATMs, sources said the 2017-18 data also threw up several instances of what they believed was money meant to have been used for illicit purposes. In a large number of cases, the PAN furnished was incorrect or was not shared at all.
Through the proposed 2% tax deduction at source, the government hopes to improve tracking of entities that withdraw large amounts of cash as entities withdrawing money will give their correct PAN to claim adjustment at the time of payment of advance tax.
Sources said there were over one lakh PAN holders who withdrew Rs 1-2 crore cash during 2017-18, while there were close to 500 entities that took out over Rs 100 crore from their bank accounts. Nearly half the cash withdrawals during 2017-18 were from accounts where annual amount taken out was over Rs 100 crore.
The government collects data on all current accounts which have annual cash withdrawals of Rs 50 lakh or more, while data for some savings bank accounts is also reported by banks.
“The idea is to move to a less cash economy and this is a step in that direction. Most businesses don’t need to have large cash transactions,” a tax official told TOI.
In the budget, finance minister Nirmala Sitharaman also proposed that entities with annual turnover of over Rs 50 crore mandatorily provide digital payment tools such as QR code-based UPI, credit cards, NEFT and RTGS where there is no burden either on the consumer or the merchant.
Over the next few weeks, the Reserve Bank of India is expected to work out the details in a way that banks cushion consumers and merchants in the same way as they are doing for RTGS and NEFT transactions, which have now been made free for account holders using the two facilities to electronically transfer money to other accounts.