The provisions of the law relating to BCT Tax have been modified a great deal, from what was originally proposed. Here is a brief discussion on the provisions:

1. The law is applicable to all persons including individuals, HUF's businesses, trusts, Governments and to all withdrawals whatever be the purpose of such withdrawal. The quantum of money permitted to be withdrawn without the payment of tax is lower in case of individuals and HUF's.

2. The purpose for which the money is withdrawn is not relevant for the purpose of the BCT law. There are many genuine purposes for which one has to withdraw cash. Take the example of a construction company which makes payment of lakhs of rupees at the construction site to the daily wage earners, the amount being paid to each of such worker being a small sum of money. The provisions of the law would still be attracted.

3. Withdrawal from a saving bank account is however outside the purview of the BCT law.

4. It may be worth mentioning here that even in respect of disallowance of payment in excess of Rs 20000 not made through a crossed cheque, there are many exceptions provided under Rule 6DD, which recognise the difficulty in carrying on transactions through banking system. However, the BCT tax does not recognise any exceptions, and the whole amount shall become taxable.

5. The law provides for taxability of BCT in respect of 'scheduled banks'. Since co-operative banks have been kept out of the provision of the law, and since people need to withdraw cash for many purposes, this measure is likely to shift large balances to non-scheduled banks.
   
   

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6. The implementation of BCT tax would be an ordeal for the banks. Banks would have to collect tax, keep a record of tax so collected, and pay the tax to the Govt. every month. They would have to file an annual return and would have to get it assessed. The cost per transaction to the bank of doing this exercise is likely to be more than the tax collected in most of such transactions.

7. In case of ATM withdrawals, the software would be required to be modified, so that the machines would pay 0.1% less than the amount requisitioned by the customer.

8. The law speaks of a transaction exceeding Rs 25000/Rs 100,000 on a single day. It is not clear whether this limit is in respect of a branch, or of the banking company. On plain reading of the provision, it seems the limit is in respect of 'any schedule bank', which means if more than the specified amount is withdrawn in aggregate from different branches of the same bank, the provision would be attracted. In a bank where branches are not networked, it would be impossible to monitor the transactions.

9. There will be considerable difficulties in implementing the withdrawals from ATM's. If a customer withdraws Rs 24,000 in the first transaction, and later withdraws an amount of more than Rs 1,000, the tax would be required to be deducted on the whole amount. This is going to be a challenging job for the bank and the designers of the software. ATM's work on the principle of redundant distributed processing, where the data is processed locally at the ATM, and is updated later in the central database. If somebody withdraws less than Rs 25,000 per transaction, and before the central database is updated, makes another withdrawal from another ATM, he would be able to avoid tax, adding to the problems of the bank.

10. Taxable transaction is defined to mean, inter alia, a transaction of encashment of a term deposit of an amount exceeding the specified amount. Proviso to Clause 95 says that no banking transaction tax shall be payable if the amount of term deposit is credited to any account of the bank. It the intention is not to tax this amount, I wonder how this would be monitored, if the amount gets merged with the account of a person, and he makes a combined withdrawal from that account.