India could announce an amnesty scheme to give its citizens an opportunity to come clean on their undeclared assets and bank accounts held overseas, joining the likes of the US, UK, Italy, and Germany that have announced similar schemes.

The finance ministry is considering a scheme - offshore voluntary compliance scheme - that could allow for voluntary declaration of undisclosed assets held overseas, helping put such funds to productive use in the country and also raise revenues.

"The scheme is under consideration. The income-tax department's flow of information has become robust. So, it time to consider such a scheme," said a finance ministry official. A panel on black money headed by the Central Board Direct Taxes chairman is expected to take up the proposal at its next meeting later this month.

However, selling such a scheme politically will be difficult, as it is sure to invite charges of condoning black money at a time when corruption issue has created widespread angst.

In its reply to Parliament earlier this year, the finance ministry had categorically ruled out such an amnesty scheme but has begun to deliberate it after India Inc made a pitch for channelising undisclosed funds lying overseas for infrastructure development in its interaction with finance minister Pranab Mukherjee on August 1.

The ministry is looking at various options, such as reduction in penalty and relief from prosecution and mandatory disclosure of source of income. "Final call on the scheme and its structure would be taken only after considering all pros and cons," said the official.

Tax experts say such a scheme can only work if confidentiality of data and identity is kept and income-tax investigation becomes more rigorous. "Deterrent has to be strong enough for such a scheme to make sense," said Sudhir Kapadia, tax markets leader, Ernst & Young.

An expert group in the Central Board of Direct Taxes had recommended a similar scheme earlier, but it could not be launched as flow of information on overseas accounts and assets was not robust.

India has signed information exchange agreements with tax havens and set up overseas tax units in certain sensitive tax jurisdictions, such as Mauritius, which has helped increase the flow of information.

The income-tax department has also strengthened its internal information systems and has created a directorate of criminal investigation to deal with tax-related crime.

Investigation directorates have collected data from agents and officials of foreign banks offering services and soliciting opening of foreign banks accounts.

The income-tax department is also receiving data from the financial intelligence unit in India that has begun to receive data from other FIUs.

The department had recently issued showcause notices to some of the foreign account holders based on information it received through different channels.

Officials feel the possibility that bank accounts and funds held overseas could come to the notice of tax authorities may encourage people to avail of the scheme.

The buzz of the government launching an amnesty scheme had got louder ahead of Budget 2011-12 but no scheme was unveiled. Mukherjee later clarified: "Amnesty schemes have a double side. Sometimes these are criticised. People say these are at the cost of honest tax payers and sometimes it helps bring in money." Previous such schemes had also attracted criticism. The Supreme Court also called the menace a "plunder of the nation".