Date:01/03/2005 URL: http://www.thehindubusinessline.com/2005/03/01/stories/2005030101740500.htm

Back `Tax on cash withdrawals an anti-evasion step'

Our Bureau

New Delhi , Feb. 28

DESCRIBING his move to impose a 0.1-per cent tax on cash withdrawals of Rs 10,000 a day from bank as "a small part of the Budget", Mr Chidambaram said it was a purely an anti-tax evasion measure, not aimed at penalising account holders.

"I am more amused than concerned over the criticism. Those who are opposing it are not opposing it because of the levy but because of fears over leaving a tax trail," Mr Chidambaram said in his post-Budget press conference.

He said it was not a revenue raising measure. "The idea behind imposing this tax was to have a tax trail on such withdrawals. Huge amounts of cash are withdrawn every day. They go into a black hole," Mr Chidambaram said.

Asked why he had not taken any credit for disinvestment in the Budget, Mr Chidambaram said since it has now been decided that all proceeds from disinvestment would go directly to the National Investment Fund, such funds raised could not be shown in the Budget.

He said the Government has not arrived at any figure for disinvestment for fiscal 2005-06. "I intend to go according to the pace allowed by the Cabinet Committee on Economic Affairs," he said.

Mr Chidambaram said the exact level of foreign direct investment to be allowed in mining, pension and trade would be determined after detailed consultations within the Government. "These are new sectors where there has been no FDI. We have to start consultations and arrive at numbers," he said.

Queried on the savings that would qualify for the consolidated Rs 1 lakh deduction from income before tax is calculated, Mr Chidambaram said all saving instruments that are specified under Section 88 of the Income Tax Act would qualify for the benefit.

Asked how much independence he had in framing the Budget proposals especially with the Congress Chairperson, Ms Sonia Gandhi, sending her suggestions, Mr Chidambaram said the final Budget proposals were drafted by him and cleared by the Prime Minister, Mr Manmohan Singh.

"Ms Sonia Gandhi, as the Chairperson of United Progressive Alliance, had every right to give suggestions relating to the Budget to carry forward the agenda laid down in the NCMP. The Government has every right and maybe a duty to listen to the suggestions made by her," he said.