NEW DELHI: In an effort to boost retail investors’ participation in the equity markets, the government is planning to replace the current Rajiv Gandhi Equity Savings Scheme (RGESS) with a ‘new scheme’.
Calling RGESS a complete failure, as the total investment in the scheme has been only Rs 90.73 crore till November 30 (as per data from the National Securities Depositories Limited), a senior Finance Ministry official said, “The scheme is not picked up at all. We are in the process of making the scheme more attractive from the point of view of taxation as well as investment.” The official further said, “There will be a new scheme in a new name. The government is likely to introduce the scheme in the upcoming Budget.”
The RGESS was launched in 2013 by the then UPA government with the expressed goal of introducing people to equity investments. Despite RGESS offering tax benefits, most market experts believe that the complex nature of the scheme has made it out of favour for investment.
The scheme allows new retail investors, who have never invested in any equity investments earlier, to get a tax break. They can invest up to Rs 50,000 in each of these years, with a lock-in of three years, and get half of the invested amount deducted from their taxable income. The scheme allows for income tax deduction of 50 per cent to new retail investors, who invest up to Rs 50,000 directly in equities and whose annual income is below Rs 12 lakh per annum.
According to the Finance Ministry official, the proposed new scheme will be more flexible in terms of investing as ‘systematic investment plans’ of equity mutual funds. This, the government feels, will bring more investors chanellising their savings in the equity markets rather than restricting investors to open only demat accounts.