The budget is expected to call for deposits of gold with the government for a period of seven to ten years. No questions will be asked on the source of gold. Certificates of deposit would be issued which are likely to be allowed to be traded in the fledgling derivatives market. The certificates, which will be valued at going market prices, will earn a nominal rate of interest of around 2 to 3 per cent per annum. The certificates can be encashed at maturity at the going market price. Alternatively, the government will return the exact quantity of gold deposited at the beginning.

Clearly, the aim of the scheme is to provide an amnesty scheme for those who have converted their unaccounted funds into gold. The attractiveness of the scheme would lie in the fact that no taxes will be levied on the gold that is deposited with the government, except perhaps atax on the nominal interest accruals on the deposits.

Another advantage for subscribers of the scheme would be the immediate liquidity that will be available by hawking off the certificates of deposit in the secondary market. The finance ministry is working out the likely tax incidence on monetary accruals.