The government will come down heavily on tax evaders and take steps to prevent black money generation, Finance Minister P Chidambaram said on Thursday.

"I will come down heavily (on tax evaders). We have taken a small step," he said referring to the tax on cash withdrawal.

"We have documentary evidence that huge cash transactions take place and they leave no trail at all. This is how black money is generated and circulated from hand to hand. We have taken a small step," he said in an interview to DD News.

• Now everyone will save tax!

"Out of the 103 crore (1.03 billion) people in the country," Chidambaram said, "102 crore (1.02 billion) people are not concerned with the tax on cash withdrawals of Rs 10,000 every day. Nobody is cribbing about Rs 10 but about the tax trails. I need to discourage huge cash transactions."

Elaborating on the tax trail, he said Tax Information Network is supposed to bring in all information together along with the annual information report, which specified authorities have to report.

"We will have information network where we can cross-verify transaction by individuals in different ways," Chidambaram explained.

Asserting that tax reforms announced in the Budget was favourable for honest taxpayers, he said: "Every taxpayer in every tax bracket is a winner."

"So a hard-working person, who has an income of Rs 2 lakh need not pay tax. He will get a threshold exemptions of Rs 1 lakh and if he saves another Rs 1 lakh in whatever manner he likes, he need not pay any tax," he said.

Justifying the proposal to withdraw standard deduction for salaried class in the Budget, Chidambaram said: "I think it is a clean tax reform that will benefit everybody. What is the need for standard deduction. It is outdated. We must become modern with a modern tax system."

He said the exemption limit of Rs 1 lakh will give "lot of freedom" to savers.

All tax saving instruments under Section 88 and 80L have been combined and a person has the freedom to save in any of the 17-18 saving avenues, he said pointing to the previous provisions where taxpayers were restricted to invest in a particular instrument beyond a limit.

He also said that India Inc stands to gain from cut in corporate tax rate by 5 per cent, changes in depreciation norms and the proposed Special Purpose Vehicle for funding infrastructure projects.

Corporates now have to pay corporate tax of 35 per cent, a 2 per cent surcharge and 2 per cent education cess, which takes the total tax burden to 36.6 per cent.

But the proposed cut in tax rate to 30 per cent, along with a 10 per cent surcharge and 2 per cent education cess, works out to a total tax burden of 33.6 per cent.

"So there is a neat 3 per cent less reduction in corporate tax rate," Chidambaram said.

Moreover, he said manufacturing companies have gained from the large depreciation rate. Only trading firms and software companies did not gain from this, he said.

On infrastructure, he said most of these projects can be funded for 5 years by banks and the proposed SPV takes care of viability gap funding.

Elaboraing on the infrastructure funding, Chidambaram said that banks can fund a project for the first 5 years and the SPV can raise resources at low cost and fund the project for the remaining 6-12 years.

Since the SPV would be guaranteed by the government, he said it can easily raise Rs 10,000 crore (Rs 100 billion) with the enormous liquidity in the market.