Circular No. 6/2005

6/2005 dated 25 07 2005

What this is

Circular No. 6/2005 was issued by the Central Board of Direct Taxes on 25 July 2005. Its subject is 6/2005 dated 25 07 2005.

What it does

Takes bank-to-bank cash transactions out of the Banking Cash Transaction Tax. The Finance Act, 2005 had levied BCTT at 0.1 per cent from 1st June, 2005 on cash withdrawn from a non-savings account with a scheduled bank above Rs. 25,000 a day for an individual or Hindu undivided family and Rs. 1,00,000 a day for others, and on cash received on encashment of term deposits above the same limits. The Board directs that where the account holder drawing the cash is itself a bank, scheduled or non-scheduled including a co-operative bank, no BCTT is to be collected, and the same for cash received on encashment of a term deposit standing in a bank's name. A non-scheduled bank is a banking company under clause (c) of section 5 of the Banking Regulation Act, 1949 that is not a scheduled bank.

Why it was issued

It had come to the Government's notice that scheduled banks were collecting BCTT when other banks drew cash from their accounts, though such drawings are only to meet the drawer bank's normal banking requirements and were never intended to be taxed.

Who it reaches

Scheduled banks collecting BCTT
Non-scheduled and co-operative banks maintaining accounts with scheduled banks
Bank branch staff operating the BCTT levy

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.5	s.5

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

ORDER
INCOME-TAX ACT
Finance Act, 2005 - Provisions relating to Banking Cash Transaction Tax
CIRCULAR NO. 6/2005, DATED 25-7-2005
The Finance Act, 2005 has, with effect from 1st June, 2005, introduced a new levy, namely, the Banking Cash Transaction Tax (BCTT) at the rate of 0.1 per cent on the following transactions,—
(i) withdrawal of cash from an account (other than a saving account) maintained with a scheduled bank on any single day exceeding Rs. 25,000 by an individual or HUF and Rs. 1,00,000 by other persons;
(ii) receipt of cash on encashment of term deposits with a scheduled bank on any single day exceeding Rs. 25,000 by an individual or HUF and Rs. 1,00,000 by other persons.
2. It has been brought to the notice of the Government that scheduled banks are also collecting BCTT on the transactions of withdrawals of cash made by other banks (both scheduled and non-scheduled, including co-operative banks) from their accounts maintained with the scheduled banks. Ordinarily, such withdrawals are purely for enabling the drawer banks to meet their normal banking requirements, and such transactions cannot be equated with cash transaction of regular account holders. As there is no intention to levy BCTT on bank-to-bank transactions, the Government has decided that transactions of withdrawal of cash from an account maintained by a scheduled bank or non-scheduled bank (including a co-operative bank) with a scheduled bank will not be liable to BCTT. Similarly, the transactions of receipt of cash from any scheduled bank on encashment of term deposits in the name of a scheduled bank or non-scheduled bank (including a co-operative bank) will also not be liable to BCTT. Accordingly, all the scheduled banks are advised not to collect BCTT on such bank-to-bank transactions.
3. For this purpose, a "non-scheduled bank" means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949, which is not a scheduled bank.
nn

What to watch

The relief is confined to withdrawals and term-deposit encashments where the account or deposit is in a bank's name; ordinary account holders remain within the levy as the Finance Act, 2005 laid it down.
BCTT itself is a levy under the Finance Act, 2005, not the Income-tax Act, and was a temporary tax; this circular speaks only to how it was to be collected.
The Board's instruction is prospective in its terms; the text says nothing about refunding BCTT already collected on bank-to-bank drawings.

Where you meet it

In a bank's BCTT return and in any demand raised on a scheduled bank for BCTT it failed to collect on large cash withdrawals.

What it names

It mentions. Circular No. 6/2005

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 13/2024 [F.No. C-14011/41/2018-V&L] / SO 312(E) — Ministry of Finance 19 January 2024
Notification No. 12/2024 [F.No. C-14011/46/2018-V&L] / SO 311(E) — Ministry of Finance 19 January 2024
Circular No. 22/2022 — Condonation of delay under section 119 2 b of the income tax act 1961 in filing of form no.10a 1 November 2022
Notification No. 93/2021 [F.No. 370142/34/2021-TPL(Part III)] / GSR 578(E) — Ministry of Finance 18 August 2021
Circular No. 3/2021 — Circular under section 10 of the direct tax vivad se vishwas act 2020 4 March 2021
Circular No. 21/2020 — Clarifications on provisions of the direct tax vivad se vishwas act 2020 4 December 2020

← Circular No. 7/2005 · Circular No. 5/2005 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.