Tamil Nadu Chief Minister J. Jayalalitha Thursday sought exemption for state governments, public sector undertakings and local bodies from the Banking Cash Transaction Act imposed this year by the central government.

In a letter sent to Prime Minister Manmohan Singh Thursday, Jayalalitha said: "The reason for introducing such a tax was purportedly to unearth black money.

She pointed out that the levy on cash transactions by state governments and its entities did not have any connection with "the stated objective" of the act.

Jayalalitha noted that exemption from the act had been given for inter-bank transactions and insisted that the law be amended to give relief to state governments and public sector units.

She said: "Any withdrawal from the consolidated fund and public account by state governments, and also by the PSUs and local bodies, is purely administrative in nature and tax on such withdrawals is totally regressive."

She alleged the cash withdrawal tax added to the financial burden of states.