Budget 2011: Black money scheme to fund infrastructure?

In what will be seen as a bold and controversial move, finance minister (FM) Pranab Mukherjee is likely to propose a scheme to prise out black money within and outside India.

Sources ruled out an amnesty plan like the Voluntary Disclosure of Income Scheme announced in 1997, because of the apprehension that this will lead to litigations.

Instead, the government may choose to mop up black money — even those stashed abroad — through some infrastructure or other bonds, where the source of income will not be looked at. While no accurate figure of black money held by Indians is available, estimates put it at Rs4.5 lakh crore.

India Inc are also likely to be smiling after the FM’s speech which is likely to bring down the rate of surcharge on corporate tax, which is 7.5%.

The reduction will be in line with the Direct Taxes Code (DTC), which does not contain any provision for surcharge. But there is unlikely to be any major changes in direct taxes, since the DTC is proposed to be introduced from April 2012.

The area of indirect taxes though, could witness a lot of action as the FM may make some big announcements on the Goods & Services Tax (GST) and make changes in the rates of Central Excise and Customs Duty to signal the government’s strong will to move towards GST by April 2012.

The concurrence of state governments is needed for GST to come into effect, but the BJP’s opposition has thwarted the finance ministry’s efforts so far.