Govt. in favor of new tax-saving scheme to tap ‘idle money’

The government is thinking over of introducing a new tax-saving scheme to collect 'idle money' kept with households and elsewhere in the system mainly for building funds for infrastructure.

According to sources the tax benefits offered may be on investments up to Rs 5lakh and be involved in somewhat meeting the country's infrastructure funding needs, which have been gauged at as high as $750 billion.

The scheme can provide multiple purposes including giving additional tax benefits to the public, channelizing the huge amount of money lying idle in saving accounts or with households for productive means, and this will also not add to the fiscal deficit, the sources said.

The sources added the government has already made an announcement of borrowing program of over Rs 3,00,000 crore for the current fiscal and if further there is any increase the liquidity will be made available to the drying up private sector and also add to the expansion of fiscal deficit.

Various sectors have been demanding for tax benefits for citizens and also garnering alternative resources for meeting the government's spending needs.

At present, collective tax benefits are being offered on an investment of Rs one lakh in insurance, pension schemes, bonds, mutual funds, children's education and housing loans, etc. An additional benefit of up to Rs 1.5 lakh is given only for housing loan interest payments.

As per Planning Commission approximation, the country would require around $500 billion for the building up of infrastructure during the remaining period of the 11th Plan (2007-12).

According to country top private sector bank ICICI Bank's Chairman K.V. Kamath the capital need for the infrastructure sector will be even higher, at $750 billion, over the next three years.

Meanwhile the policymakers have supported spending most of the money set for infrastructure as quickly as possible in the remaining years of the current five-year plan.

Financial services major Reliance Money's CEO Sudip Bandyopadhyay points out any such initiative will be welcomed from the government in case it launches some sort of infrastructure bonds that can offer tax benefits of up to Rs five lakh in the Union Budget.