In a year, 448 entities withdrew over Rs 100 each which accounted for Rs 5.56 lakh crore in cash withdrawals, and prompted the government to take action to control it. The present Modi-led NDA government has been actively prompting the use of digital transactions to make India a paper-less economy. However, the number of cash withdrawals have increased rather than lower, post demonetisation.
Official data also showed that almost 2 lakh individuals and business entities withdrew over Rs one crore in cash from bank accounts in 2017-18. The withdrawals from these entities accounted for a total of over Rs 11.31 lakh crore in cash.
In her Budget Speech, Finance Minister Nirmala Sitharaman said, "To discourage the practice of making business payments in cash, I propose to levy TDS of 2 per cent on cash withdrawal exceeding Rs 1 crore in a year from a bank account".
A Times of India report earlier this week, citing sources, said that there were several instances where it is believed that the money withdrawn may have been used for illicit purposes as in these cases, the PAN furnished was either incorrect or not provided at all.
The government hopes to be able to get a better track on entities that withdraw large sums of cash by imposing the proposed TDS, as they will be required to provide the correct PAN in order to claim adjustment at the time of payment of advance tax.