New Delhi: In a major step to check corruption and tax evasion, transactions above Rs. 3 lakh will not be allowed in cash, Finance Minister Arun Jaitley said today while announcing the budget. Cash transactions above three lakhs will be banned from April. The government had decided to accept the recommendation of a Special Investigation Team or SIT, Mr Jaitley said. The SIT was set up by the Supreme Court to suggest ways to check black or untaxed money and bring back crores parked illegally in foreign bank accounts.
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The SIT, headed by former judge MB Shah, has submitted five reports to the Supreme Court on steps needed to curb black money.
Noting that a large amount of unaccounted wealth is stored in cash, SIT had said: “Having considered the provisions which exist in this regard in various countries and also having considered various reports and observations of courts regarding cash transactions, the SIT felt that there is a need to put an upper limit to cash transactions.”
Mr Jaitley said the SIT had recommended a total ban on cash transactions of Rs. 3 lakh and above and the government had decided to accept it.
In November, in a massive step to check black money, the government banned 500 and 1,000 rupee notes overnight.
In another anti-corruption measure, the government has announced that donations in cash, currently allowed up to Rs. 20,000 without explaining the source, will now be capped at Rs. 2,000.
After Prime Minister Narendra Modi announced the ban on 500 and 1,000-rupee notes in November, parties were allowed to deposit the abolished bills in banks without paying taxes.
A decades-old law exempts parties from taxes on a range of sources of income including donations by volunteers. Contributions of up to Rs. 20,000 in cash did not have to be explained so far.