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SEBI: Route tax-saving Rajiv Gandhi Equity Savings through MF

According to SEBI, the first time investors may not have adequate information about the stock market

May 24, 2012 2:41 IST | India Infoline News Service
To minimise risk associated with direct stock investment for new investors, SEBI (Securities and Exchange Board of India) has asked the government to route tax-saving Rajiv Gandhi Equity Savings Scheme (RGESS) through mutual fund.

On 19th May, the market regulator has submitted a proposal in this regard to the finance ministry. According to SEBI, the first time investors may not have adequate information about the stock market and they should enter the market through institutional investors.
In Budget 2012, for those with less than Rs. 1 million income, a new tax deduction was introduced for direct equity investments. Under the RGESS, investor will be able to claim 50% of their investments in direct equity up to the maximum investment limit of Rs. 50,000. The investment is subject to a lock-in period of three years, similar to the current equity linked saving schemes (ELSS).

The modalities of the scheme are not yet specified, and further details are still awaited. A retail investor can avail the scheme only once in a life time. This is the first-ever tax benefit scheme announced by the government to encourage retail investors participation in the equity market. By offering this scheme, the government aims at channelising household savings into stock markets. SEBI also said there would be clarity on the ELSS once the Direct Taxes Code (DTC) Bill is finalised.

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