Fintotal News Analysis | Decision on Rajiv Gandhi Equity Savings Scheme Soon
Decision on Rajiv Gandhi Equity Savings Scheme Soon
Ruby Jacob, 29 Aug 2012

Rajiv Gandhi Equity Savings Scheme (RGESS) was the most interesting addition in Union Budget 2012-13. RGESS allows income tax deduction of 50% to new retail investors who invest up to Rs.50,000 directly in equities and whose annual income is below Rs.10 lakhs. It has a lock-in period of 3 years. But that's the first and last thing we have heard from the finance ministry on it. There is no clarity on how the scheme will be implemented as of now.

If new investors are those who invest in equities the first time ever, this scheme is essentially a once-in-a-lifetime rebate. That makes it disappointing.

Rajiv Gandhi Equity Savings Scheme is being promoted by the government to lure equity-shy retail investors to invest in them. But making first time investors to enter equities directly through shares is like asking a toddler to cross a highway by himself. Investors with absolutely no exposure to equities should enter them via a mutual fund first.

SEBI and mutual fund AMCs have vouched for RGESS to include mutual funds which have securities allowed under RGESS as the underlying. The finance ministry is expected to finalize its decision on inclusion of mutual funds under RGESS by mid September.

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