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RGESS to cover those earning up to Rs 12 lakh

Team Money Today     February 28, 2013
Finance Minister P Chidambaram has proposed to extend the tax benefit under the Rajiv Gandhi Equity Savings Scheme (RGESS) to individuals earning up to Rs 12 lakh a year. At present, only those earning up to Rs 10 lakh can benefit from the scheme.

This will enable investors in the 30 per cent tax bracket (above Rs 10 lakh) to also benefit from the scheme. At present, one can save up to Rs 5,150 under the RGESS. With the new law, one will be able to save up to Rs 7,725.

Under the RGESS, first-time equity investors investing up to Rs 50,000 in approved stocks and mutual funds can claim 50 per cent of the amount as deduction.

Also, the benefit can now be availed for three years as against one time at present. "As far as we understand, one can now invest up to Rs 50,000 each for three years and claim tax benefit under the scheme," says Nilesh Sathe, CEO, LIC Nomura Mutual Fund.

However, the maximum annual investment limit of Rs 50,000 under the scheme has been left untouched, contrary to industry expectations that it will be increased to Rs 1 lakh.

Among other Budget announcements likely to have a positive impact on mutual fund industry are inclusion of exchange-traded funds, or ETFs, and debt mutual funds in the list of securities in which pension funds and provident funds can invest as well as reduction of the securities transaction tax on mutual fund and ETF transactions from 0.1 per cent to 0.001 per cent.

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