Advocate Aditya Ajgaonkar has vehemently argued that section 194N of the Income-tax Act, 1961, which creates an obligation to deduct tax at source at the time of withdrawal of cash, violates Articles 21, 265 and 300A of the Constitution. He has put forth his arguments in a logical and persuasive manner and has made extensive reference to several landmark judgements
Privacy, Deprivation Of Property And Errant Public Policy. Ruminating Upon The Constitutionality Of Section 194N With Regard To Articles 21, 265, 300A Of The Constitution Of India After The Amendment By The Finance Act, 2020
The Finance Act (No.2), 2019, introduced Section 194N into the Income-tax Act, 1961 (herein after referred to as ‘the Act’). Amended already without discussion, or without even a mention in either the budget speech or the memorandum or in the Finance Bill, 2020, the Section has managed to spread its tentacles and become more onerous without ever being on a sound constitutional footing. Though there is a lot of literation already on the subject, this article seeks to revisit the Section and weigh the possible challenges that this Section could face when it’s constitutionality is concerned with regard to its raison d’être (claimed reason for existence) and its possible conflict with important Constitutional rights such as Right to Property and Right to Privacyqua Right to Life. Considering the fact that the deck for the triggering of the Section has been lowered to cash withdrawal of rupees Twenty lakh only as opposed to the earlier deck of Rupees one crore and the fact that it could possibly fall foul of Article 21 of the Constitution of India, even in the case of those persons who are regular filers of Income tax Returns upon hitting the revised cash withdrawal limit for which no tax need be deducted at source for non-filers of Income Tax Returns.
Section 194N as it originally stood provided that ‘every person’ being a (i) Banking Company to which the Banking Regulation Act, 1949, applies, (ii) a co-operative society engaged in carrying on the business of banking or (iii) a post office (hereinafter collectively for the purposes of this essay referred to as ‘the bank’), who is responsible for paying any sum, or, as the case may be, aggregate of sums, in cash, in excess of one crore rupees during the previous year, to any person (the recipient) from one or more accounts maintained by the recipient with it, shall, at the time of payment of such sum, deduct an amount equal to two per cent of sum exceeding one crore rupees, as Income-tax. The provisio to the Section carves out the exceptions to this obligation. Section 194N was made applicable from September 1, 2019. The said Section was amended by Finance Act, 2020, where specific provisions making the aggravating the rigour of an already onerous section were introduced providing, that in case of a recipient who has not filed the returns of income for all three assessment years relevant to three assessment years for which the time limit of filing return of income under Section 139(1) has expired, the obligation to deduct tax at source would be at two percent if the withdrawal or aggregate of withdrawal of cash is between rupees twenty lakh to one crore and at 5 percent if the withdrawal or aggregate of withdrawal of cash is above Rupees one crore.
Section 194N of the Act is unique amongst the various provisions imposing the obligation to deduct tax at source under Chapter XVII ‘collection and recovery of tax” of the Act. Its uniqueness is that as opposed to the other Sections under this Chapter that impose an obligation to deduct of tax at source upon those transactions that have an embedded element of Income (either deemed or otherwise) within them, it seeks to impose an arbitrary obligation to deduct tax at source in a transaction that does not give rise to any income in the hands of the Recipient. In doing so, the said Section turns a proverbial blind eye to Section 4 as well as Section 190 of the Act.Chapter II (Basis of Charge) of the Income-tax Act, 1961, provides for the charge of Income-tax as per Section 4.
The budget speech and the Memorandum to Finance Bill (No.2), 2019, that introduced the anomaly that is section 194N offers an insight into the reason for imposition of the same. “Mr. Speaker, Sir, our Government has taken a number of initiatives in the recent past for the promotion of digital payments and less cash economy. To promote digital payments further, I propose to take a slew of measures. To discourage the practice of making business payments in cash, I propose to levy TDS of 2% on cash withdrawal exceeding ` 1 crore in a year from a bank account. Further, there are low-cost digital modes of payment such as BHIM UPI, UPI-QR Code, Aadhaar Pay, certain Debit cards, NEFT, RTGS etc. which can be used to promote less cash economy. I, therefore, propose that the business establishments with annual turnover more than ` 50 crore shall offer such low cost digital modes of payment to their customers and no charges or Merchant Discount Rate shall be imposed on customers as well as merchants. RBI and Banks will absorb these costs from the savings that will accrue to them on account of handling less cash as people move to these digital modes of payment. Necessary amendments are being made in the Income Tax Act and the Payments and Settlement Systems Act, 2007 to give effect to these provisions.” A further insight can be obtained by examining the notes of clauses to the finance bill“The proposed new section 194N provides that a banking company or a co-operative society engaged in carrying on the business of banking or a post office, which is responsible for paying any sum or aggregate of sums, in excess of one crore rupees in cash during the previous year to any person (referred to as the recipient in the section) from an account maintained by the recipient with such banking company or co-operative society or post office shall, at the time of payment of such amount, deduct an amount equal to two per cent. of sum exceeding one crore rupees as income-tax. The proviso to the said section provides that the provisions of the proposed new section shall not apply to any payment made to the Government, any banking company, co-operative society engaged in carrying on the business of banking, post office, business correspondent of a banking company or co-operative society, engaged in carrying the business of banking, any white label automated teller machine operator of a banking company or co-operative society engaged in carrying the business of banking, or such other persons or class of persons, which the Central Government may, specify by notification in consultation with the Reserve Bank of India,. These amendments will take effect from 1st September, 2019.”
The Memorandum to the Finance Bill (No. 2), 2019 states:-
“In order to further discourage cash transactions and move towards less cash economy, it is proposed to insert a new section 194N in the Act to provide for levy of TDS at the rate of two per cent on cash payments in excess of one crore rupees in aggregate made during the year, by a banking company or cooperative bank or post office, to any person from an account maintained by the recipient. It is proposed to exempt payment made to certain recipients, such as the Government, banking company, cooperative society engaged in carrying on the business of banking, post office, banking correspondents and white label ATM operators, who are involved in the handling of substantial amounts of cash as a part of their business operation, from the application of this provision. It is proposed to empower the Central Government to exempt other recipients, through a notification in the official Gazette in consultation with the Reserve Bank of India. This amendment will take effect from 1st September, 2019.”
The CBDT Press Release, dated 30-08-2019 states :- In order to discourage cash transactions and move towards less cash economy, the Finance (No. 2) Act, 2019 has inserted a new section 194N in the Income-tax Act, 1961 (the ‘Act’), to provide for levy of tax deduction at source (TDS) @2% on cash payments in excess of one crore rupees in aggregate made during the year, by a banking company or cooperative bank or post office, to any person from one or more accounts maintained with it by the recipient. The above section shall come into effect from 1st September, 2019.Since the section provided that the person responsible for paying any sum, or, as the case may be, aggregate of sums, in cash, in excess of one crore rupees during the previous year to deduct income tax @2% on cash payment in excess of rupees one crore, queries were received from the general public through social media on the applicability of this section on withdrawal of cash from 01.04.2019 to 31.08.2019.The CBDT, having considered the concerns of the people, hereby clarifies that section 194N inserted in the Act, is to come into effect from 1st September, 2019. Hence, any cash withdrawal prior to 1st September, 2019 will not be subjected to the TDS under section 194N of the Act. However, since the threshold of Rs. 1 crore is with respect to the previous year, calculation of amount of cash withdrawal for triggering deduction under section 194N of the Act shall be counted from 1st April, 2019. Hence, if a person has already withdrawn Rs. 1 crore or more in cash upto 31st August, 2019 from one or more accounts maintained with a banking company or a cooperative bank or a post office, the two per cent TDS shall apply on all subsequent cash withdrawals.
In addition to the CBDT Press release, the CBDT has come up with Circulars, the latest one being Circular 14/2020, dated 20-07-2009, which makes reference to Notifications No. 68 of 2009, 70 of 2019, 80 of 2019 dated 18.09.2019, 20.09.2019 and 15.10.2019 respectively. The three 2019 circulars had notified certain transactions between persons that would not attract the liability of tax deduction at source under Section 194N. The 2020 Circular has clarified that the said transactions are still out of the ambit of the burden sought to be imposed by Section 194N.
Chapter II of the Act forms the very bedrock of the imposition of Income-tax as contemplated by the Act. Section 4(1) of the Act provides that where any Central Act enacts that Income tax shall be charged for any assessment year at any rate or rates, Income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income-tax) of, the Act in respect of the total income of the previous year of every person. Section 4(2) provides that “In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act.” Section 4(2) of the Act provides that in respect of the income chargeable under Section 4(1), Income tax shall be deducted at the source or paid in advance where it is so deductible or payable under any provision of the Act. The language of Section 4(2) therefore makes it clear that what shall be deducted is ‘Income Tax’ in relation to the ‘Total Income’ of a person. It can therefore be construed that there can be no liability to deduct tax at source in respect of a transaction that is not covered within the ambit of Section 4(1) of the Act and does not form a part of the ‘Total Income’ of an Assessee. If a particular Income falls outside of Section 4(1) of the Act, then the tax deduction provisions cannot be applied [CIT v. Eli Lilly & Co. (India)(Pvt) Ltd.  312 ITR 225 (SC)] . It is a settled principle of Tax Jurisprudence that though the legislature enjoys a wide leeway in the imposition of a tax, taxing statutes need to be construed strictly. Sections mandating the deduction of tax at source are subservient and subordinate to the charging provision of Section 4 of the Act. [Bharti Airtel Ltd. v. DCIT  372 ITR 33 (Karnataka)(HC)].
Section 2 (45) of the Act, defines the term ‘Total Income’ as the total amount of income referred to in Section 5, computed in the manner laid down in this Act. Section 5(1) being the ‘Scope of total income’ states that subject to the provisions of the Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which is received or is deemed to be received in India in such a year by a person, or accrues or arises or is deemed to accrue or arise to him in India during such year or accrues or arises to him outside India during such year. It is therefore clear that ‘Total Income’ shall necessarily comprise of ‘Income’ which is received or deemed to be received. As an essential corollary, if a sum of money that is received is neither Income received not Income deemed to be received, it shall not form a part of the Total Income and therefore cannot be covered by Section 4(1) of the Act. The Hon’ble Supreme Court in the case of Steel Authority of India Ltd. v. State of Orissia (2000) 3 SCC 200 and in the case of NathpaJhakri Jt. Venture v. State of Himachal Pradesh (2000) 3 SCC 319 has held that tax cannot be deducted at source in respect of transactions which are not liable to tax and merely because there was an entitlement of refund would not cure the infirmity. Even though the said Judgements are with regards to deduction of tax in the case of the various Sales Tax Acts, the ratio laid down by the apex court shall be equally applicable to Income tax legislation.
Section 190 of the act is the general section that provides for deduction at source and advance payment of tax. Section 190 (1) provides that “Notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction or collection at source or by advance payment or by payment under sub-section (1A) of Section 192, as the case may be, in accordance with the provisions of this chapter”. It is therefore clear by a plain reading of the words of the section that the payment by deduction or collection at source of tax can only be with respect to ‘any income’ in respect of which a regular assessment of tax is to be made. The use of the word ‘any income’ as opposed to ‘total income’ makes it apparent that there must be a ‘live nexus’ between the deduction of tax at source and the income upon which the obligation to make such deduction is sought to be imposed. It also follows that the deduction of tax at source are only methods of payment of tax and cannot by themselves impose any liability which does not already exist. Every other provision of deduction of tax at source as encapsulated by Chapter XVII conforms to the live nexus theoryas they well should. “If there can be no tax on a particular income by virtue of some special provisions contained in an enactment other than the Income-tax Act, 1961, any provision contained in Chapter XVII of the Income Tax Act cannot be invoked. The emphasis under section 190(1) is on the ‘tax on such income’. What follows from Sections 192 onwards are actually deduction or collection at source or advance payment of ‘tax on income”.[C Nanda Kumar v. UOI  396 ITR 21 (Andhra Pradesh)(HC)].Section 190(1) is the Section that provides that deduction of tax can be made prior to the regular assessment. Without the backing of Section 190, Section 194N is devoid of any authority to mandate a deduction of tax prior to regular assessment rendering it a dead letter in law.
The provisions of Chapter XVII cannot be read ‘de hors’ the provisions of Section 190. Section 194N derives its authority to mandate a deduction of tax or collection of tax at source before the actual assessment through Section 190. It therefore also follows that section 194N in as much as it seeks to impose an obligation to deduct tax at source on transactions that do not give rise to any income, shall be ‘de hors’ the authority of law and shall run afoul article 265 of the Constitution of India. Deduction of tax at source is a machinery for the recovery of tax and the said deduction of tax at source should aid the charge of tax under Section 4 as held by the Delhi High Court in UCO Bank V. Union of India  369 ITR 335 (Delhi)(HC). The provisions of deduction of tax at source are a part of a scheme. The deduction of tax is to be notwithstanding the regular assessment to be made in respect of any income. It has to be made in accordance with the provisions of Chapter XVII. The Consequences of non-deduction of the amount are governed by Section 201 of the Act. As per this Section, the consequence of non-deduction shall be that the person who is required to deduct any sum in accordance with the provisions of the Act, does not deduct the tax or does not pay or after so deducting, fails to pay the whole or any part of the tax, as required under this Act, then such person shall be deemed to be an Assessee in default in respect of such tax. The first Provisio to Section 201 of the Act provides that a person who fails to deduct the whole or part of the tax in accordance with the provision of this Chapter on the sum paid to a resident, shall not be deemed to be an Assessee in default is the said resident has (i) has furnished his return of income under Section 139, (ii) has taken into account such sum for computing income in such return of income, (iii) had paid the tax due on the income declared by him in such return of Income and a certificate to that effect is furnished. A look at the provision of Section 201 make it further clear that the scheme of Chapter XVII is to tax ‘Income’. Section 194N is incongruous to the scheme of deduction of tax at source in as much as it is imposed upon a transaction that can under no circumstances have an element of Income embedded within it. If a person is not liable for payment of tax at all, at any time, the collection of a tax from him, with a possible contingency of refund at a later stage, will not make the original levy valid; because, if particular sales or purchase are exempt from taxation altogether, they can never be taken into account, at any stage, for the purpose of calculating or arriving at the taxable turnover and for levying tax [Bhavani Cotton Mills v. State of Punjab (1967) 3 SCR 577].
Section 194N of the act imposes the obligation to deduct tax at source upon a person being a banking company, a co-operative society carrying on the business of banking or a post office (hereinafter referred to as ‘the bank’) with the recipient of the cash in excess of Rupees one crore from one or more accounts maintained by the recipient. It therefore purports to impose an obligation to deduct tax on a transaction that neither gives rise to any income (taxable or otherwise) in the hands of the recipient, nor results in any transfer of any sort of property or title in the cash withdrawn. Though the bank (for the purposes of the transaction) is a payer of money, the title of the money the payment is made on behalf of the recipient and is therefore a Capital Receipt in hands of the Recipient. Just as the repayment of the principal part of a loan cannot be subject to tax due to the lack of character of ‘Income’, neither can the withdrawal of cash from the bank account. What is accepted by a bank from its account holders is a ‘deposit’ and what is paid back is a ‘withdrawal’. The deposits can be used by the bank in the conduct of its banking business and can be withdrawn by its customers in terms of the agreed parameters of the banking relationship. Interest that accrues on the deposits with a bank are liable to be assessed to tax as Income from other sources and is duly taxed either with or without deduction at source depending upon the type of bank account. A second school of thought deems that the bank has a fiduciary relationship with the recipient and holds the money of the account holder in trust. According to this school of thought, the money with the bank in an account held by a depositor always remains the money of the depositor and therefore there can be no element of Income in withdrawing the same. The said section 194N does not purport to ban cash transactions or to levy any tax on them. There can be no levy of tax or the collection thereof on the basis of a transaction that does not give rise to any income either by itself or through deeming fiction.
Section 194N of the Act does not purport to be an anti-abuse provision. The mechanism that is suggested through the said amendment does not penalize an Assessee or invite a fresh levy of tax which could add to the total income of an Assessee. There is no whisper that prevention of tax evasion is a reason for the introduction of the said section. The Legislature had introduced a Banking Cash Transaction Tax vide Finance Act, 2005. This was introduced as a specific levy and remained on the statute books until 2009. The said levy was introduced as the Government was concerned with large cash transactions and the lack of trail left by them and was specifically introduced as an anti-tax-evasion measure. It was subsequently removed as the information that was being gathered by the said levy was also being gathered through other means. Section 194N of the Act does not purport to be an anti-tax-avoidance measure. It is therefore abundantly clear that it seeks to arm twist depositors into adopting digital payments and to dissuade them from withdrawing money from banks.
The avowed objective of the introduction of Section 194N into the Act is not to collect tax by deduction at source or even to check evasion. The said section has been imposed upon Assesses with the objective of promoting digital payment and a cashless economy. The objective, though laudable, admittedly has nothing to do with either the levy or the collection of income tax. The promotion of the digital economy cannot be done at the cost of the constitutional rights. Section 194N provides for a deduction of money on withdrawal of a person from his own funds with a bank and for the adjustment of the same against his tax liability. The scheme as envisaged by Section 194N is revenue neutral for the Government as it does not affect the tax collection in any manner.
Article 265 of the Constitution of India provides that “no tax shall be levied or collected except by the authority of the law”. The wordings of the Article are restrictive as well as enabling. The said Article 256 seeks to rein in the otherwise unbridled powers of authorities with respect to taxation. The ambit of the said Article is solely to do with the levy or the collection of tax. It becomes immediately clear that Section 194N of the Income-tax Act, 1961, runs beyond the boundaries of Article 265 of the Constitution of India blurring the lines of what can be considered as a valid part of a taxing statute. A cursory glance at Section 194N of the Act immediately brings to light that it is neither a levy of tax nor is a method of collection of the same. Without prejudice, even if it were to be assumed that Section 194N of the Act is a mechanism for the collection, that what is actually cannot by any stretch of imagination be called a tax and therefore shall fall outside the ambit of Article 265 of the Constitution of India. It is established that the ‘authority of law’ as contemplated by Article 265 of the Constitution of India cannot be arbitrary in form or function. The authority of law, though pervasive, cannot be exercised in a manner that is perverse or beyond the scope of the parent legislation. The introduction of a provision of law in a taxing statute which correlates neither to the levy of tax nor the collection of a tax is an aberration and cannot be considered to be a valid part of a taxing statute. A that allows for money to be collected by the government on a transaction not liable to tax cannot be considered to be a method of collection of tax merely because it permits the money collected to be adjusted against the tax liability of an Assessee.
Article 300A of the Constitution of India states that no person shall be deprived of his property save by the authority of law. The term property is not defined by the said Article, however, ‘cash’ as well as ‘bank balance’ are‘property’ within the ambit of Article 300A. Even though Right to property is no longer a fundamental right, it is still a constitutional right and must be zealously protected. The action of the Legislature to force a depositor to deposit through the device of a ‘tax deduction at source’ tantamount to the legislator depriving the recipient as defined by Section 194N of the Act of his property, albeit only till either assessment of tax or until the receipt of the refund post assessment. The Government therefore receives the funds, interest free from the date of the deposit of the deducted amount until the Assessment is made. Section 194N of the Act is therefore an appropriation by the Government to itself of property being money in the guise of a deduction of tax at source without any entitlement to the same through the levy of any tax and without providing any compensation.
Unlike the established narrative surrounding the statutes levying tax, general jurisprudence in as far as deprivation of public property is concerned recognises the basic principles of equity and inherent fairness of the law. Deprivation of property within the meaning of Article 300-A, generally speaking, must take place for public purpose or public interest. The concept of eminent domain which applies when a person is deprived of his property postulates that the purpose must be primarily public and not primarily of private interest and merely incidentally beneficial to the public. Any law, which deprives a person of his private property for private interest, will be unlawful and unfair and undermines the rule of law and can be subjected to judicial review. But the question as to whether the purpose is primarily public or private, has to be decided by the legislature, which of course should be made known. A law seeking to acquire private property cannot say that no compensation shall be paid. The legislation providing for deprivation of property under Article 300-A must be ‘Just, fair and reasonable’. [K.T. Plantation Private Ltd. &Onr. V. State of Karnataka (2011) 9 SCC 1]
The banking industry has been historically subject to an increasing load of compliance thrust upon it by the legislature and the executive. Amidst the various ‘know your customer’ (KYC), suspicious transaction report (STR) and the requirements of section 258BA of the income tax act, the revenue authorities are clothed with full powers to trace large withdrawals of cash from bank accounts and to demand explanation for any discrepancies. There is a framework in place to check any unlawful / illegal activities or to prevent any leakage of taxes. The imposition of an additional provision of compliance which has no net fiscal result is an additional burden upon the banks as well as the recipients in addition to being unconstitutional. Various documents such as Aadhar and PAN form a part of a larger framework to provide reliable and timely information to the taxing authorities. What further exacerbates the issue is the method by which the bank is to determine whether the individual is a non-filer of returns. Will the banks be required to ask those customers that seek to withdrawn Rupees twenty lakh during the year to show proof that they are regular filers of Income tax returns? Will a mere declaration by the customer that he is a regular filer of Income Tax Returns be sufficient for the bank to show compliance? If at all tax under this Section is not deducted by the bank due to a false declaration, would the bank be penalized? Can the bank ask for a person’s Return of Income as proof that the person is a filer of return of Income for the three previous years? There would obviously be complications that would arise due to privacy concerns. The fact that the return of income is a private document is brought out by Section 138 of the Act which places restrictions on the income tax authorities privy to information about the assesses in as far as the disclosure of information to other authorities is concerned. The Right to Privacy has been recognized as a fundamental right under Article 21 of the Constitution of India [K.S. Puttaswami&Ors. v. UOI (2017) 10 SCC 1].Is the need to withdraw a sum of more than Rupees twenty lakh to be considered a sufficient condition to necessarily cause the deprivation of a person’s privacy guaranteed by the Constitution of India?The Supreme Court has held that the individual lies at the core of constitutional focus and it is in the realisation of individual rights that the collective well-being of the community is determined. But the privacy judgement in isolation does not tell the entire story and to bring the current quandary into focus needs to be considered after counter weighing it against the Aadhar judgement [K.S. Puttaswamy (ret) &Onr. V. UOI &Onr. (2019) 1 SCC 1]. The latter contains a considerable deliberation upon the former judgement and also includes amongst the other concepts propounded, the test of proportionality being (i) the existence of a just, fair and reasonable law, (ii) the abridgement serving a legitimate state aim, (iii) the abridgement being proportionate to need such interference.
Considering the three conditions prescribed by the Supreme Court one by one, the fact that the section is not a valid taxing statute and seeks to dissuade a person from handling his own property as he deems fit by forcing the payer to deduct tax at source in a non-taxable transaction against the very grain of the rest of the Chapter as well as the Act within which it is contained can be said to not be just, fair and reasonable. As the aim of the statute is not to prevent evasion but to give an impetus to digital payments which are largely in the hands of private or state-owned enterprises, which is hardly a legitimate state aim, the abridgement of the right to privacy hardly seems to be proportional. Thirdly, it is also required to be tested whether the abridgement of the right to privacy is proportional to the need for such interference. The aim of promoting digital payments when weighed against the right to privacy which has been held to be a part of Article 21 of the consideration of India comes up woefully short and therefore miserably fails the tests laid out for proportionality as prescribed by the Supreme Court.
Though there are other tests also prescribed in the Aadhar judgement, it is important to note that the judgement was with respect to enforcing a right i.e. the right to privacy against an action of the government. This however, is taken one step forward in the case of Section 194N, where data will in effect be mandatorily be furnished to a private party or a public financial institution, both of which are not entitled to the information, but would need to collect it in order to comply with the obligations thrust on them by the section. This therefore places Section 194N on a weaker ground than Aadhar.
A person has a right to dispose of his property in the manner of his own choosing as long as it is within the framework of the law. The very fact that Article 300A of the Constitution of Indiaprescribes that no person shall be deprived of his property save by the authority of law, can be said to establish the right to hold and deal with property as a constitutional right as long as it is done within the four corners of the law.The management of a person’s private property, in accordance with the law of the land in a part of a person leading a dignified existence and is protected by Article 21 of the Constitution of India. If a person deems it risky to keep their wealth at the bank, the Legislature cannot, for the sake of promoting digital payments and a cashless economy, trammel upon his rights guaranteed by the constitution of India. Transactions done through banks have associated costs with them for the services rendered. The banking industry has been rocked by multiple scandals on a regular basis over the last few years. This has led to a loss of depositor confidence in the industry. There have been instances of banks failing or coming close to failure. There have been multiple occasions where it has been observed that depositors have been unable to withdraw their money from the banks that are extremely close to default. Banks have also been plagued by a large number of non-productive assets (NPAs) due to mismanagement and crony capitalism. The public faith in banks and financial institutions is at an all-time low. Given the uncertainty surrounding the banking industry at large, the action of the government in trying to actively promote digital payments through banks is a deliberate attempt to place roadblocks in the path of those citizens who would wish to withdraw their funds from the banks legally and at their own risk through the guise of an amendment in fiscal statute. The courts have held from time to time that people are free to carry on their business as long as it is within the four corners of the law. The reduction in the limits for cash withdrawal without having to incur the deduction of tax at source is telling. The nation started the process of economic liberalisation more than twenty eight years ago (1991). The entire concept of libralisation started from deregulation of controls and simplification of processes. Having taken two steps forwards down this path, perhaps we should stop ourselves from taking one step back?
However, what is critical is the digital web that the digital economy and the government’s actions mean to a person’s privacy and freedom. If a person wishes to withdraw a copious amount of cash from the bank and stuff it in his bed in the fashion of a scrooge and sleep upon the same instead of trusting the banking system that seems to be appearing increasingly frail, as long as every single paisa is accounted for and declared, he should be permitted to, without having to pay a toll to the omnipresent big brother that today’s governments all over the globe are turning into.
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