New tax-saving scheme likely in Budget to fund infra

The Centre is believed to be considering a new tax-saving scheme to garner `idle money' lying with households and elsewhere in the system, primarily to fund building infrastructure.The scheme could offer tax benefits for investments up to Rs 5 lakh and be instrumental in partly meeting the country's infrastructure funding needs, which have been pegged at as high as $750 billion, sources said. The scheme could serve multiple purposes including giving additional tax benefits to the public and channelising the huge amount of money lying idle in saving accounts or with households for productive means, that too without adding to the fiscal deficit, the sources noted. The government has already announced a borrowing programme of over Rs 3,00,000 crore for the current fiscal and any further increase could result in liquidity available for the private sector drying up and also add to the ballooning fiscal deficit, they added. There have been demands from various sectors for additional tax benefits for citizens and also tapping alternative resources for meeting the government's spending needs. Currently, collective tax benefits are given for an investment of Rs 1 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 allowed only for housing loan interest payments. According to Planning Commission estimates, the country would need around $500 billion to build infrastructure during the remaining period of the 11th Plan (2007-12). The country's top private sector bank ICICI Bank's chairman K V Kamath has pegged the capital need for the infrastructure sector even higher, at $750 billion, over the next three years. Policymakers have favoured spending most of the money allotted 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 said any such move would be welcome from the government if it brings out some sort of infrastructure bonds that could offer tax benefits of up to Rs 5 lakh in the Union Budget. The move could help the government raise funds, without increasing the fiscal deficit and the people would welcome it as the targeted money was anyway not giving any returns, he added. The government is also said to be considering the possibility of raising the tax exemption limit from Rs 1 lakh currently available under Section 80C of the Income Tax Act, as also the benefits for housing loan interest payment from Rs 1.5 lakh.

Source: PTI