In view of the frequent multimedia data transfer authentication and protection of images has gained importance in todays world. In this paper we propose a new watermarking technique, based on bit plane, which enhances robustness and capacity of the watermark, as well as maintains transparency of the watermark and fidelity of the image. In the proposed technique, higher strength bit plane of digital signature watermark is embedded in to a significant bit plane of the original image. The combination of bit planes (image and watermark) selection is an important issue. Therefore, a mechanism is developed for appropriate bit plane selection. Ten different attacks are selected to test different alternatives. These attacks are given different weightings as appropriate to user requirement. A weighted correlation coefficient for retrieved watermark is estimated for each of the alternatives. Based on these estimated values optimal bit plane combination is identified for a given user requirement. The proposed method is found to be useful for authentication and to prove legal ownership. We observed better results by our proposed method in comparison with the previously reported work on pseudorandom watermark embedded in least significant bit (LSB) plane.