Rajiv Gandhi Equity Savings Scheme or RGESS is a new equity tax advantage savings scheme for equity investors in India, with the stated objective of encouraging the savings of the small investors in the domestic capital markets. It is exclusively for the first time retail investors in securities market. This scheme would give tax benefits to new investors who invest up to Rs 50,000 and whose annual income is below Rs 1 million.
Commenting on this scheme, Pankaaj Maalde, head - financial planning, ApnaPaisa, said, ''I don't think this scheme will benefit to any as the conditions put in the scheme are such that it is unlikely to succeed. It is difficult to attract first time equity investor as they do not understand equity as an asset class. They prefer traditional savings instruments and prefer fixed return on capital and also want security of capital invested. Investments for the scheme can be made in installments in the year in which the tax claims are filed. Dividend payments are tax free.This scheme has a long run benefit of educating the retail investment segment and thereby moving towards financial inclusivity in the country are the additional adevantages of the scheme.''
Commenting on this scheme, Pankaaj Maalde, head - financial planning, ApnaPaisa, said, ''I don't think this scheme will benefit to any as the conditions put in the scheme are such that it is unlikely to succeed. It is difficult to attract first time equity investor as they do not understand equity as an asset class. They prefer traditional savings instruments and prefer fixed return on capital and also want security of capital invested. Investments for the scheme can be made in installments in the year in which the tax claims are filed. Dividend payments are tax free.This scheme has a long run benefit of educating the retail investment segment and thereby moving towards financial inclusivity in the country are the additional adevantages of the scheme.''
''One should be extra careful while investing in those schemes just to save nominal amount of tax of around 10% of the amount invested. Equity investment comes under high risk and high return category. Investors must invest in equity accordingly to their asset allocation. It is not clear whether person who invests through mutual fund route in equity but do not have demat account will be considered as first time equity investor or not. Surprisingly investors are allowed to sell and repurchase the stocks after one year and scheme has a complex formula of 270 days which will be difficult for a lay investor to understand.''
''The precondition of first time investors should be removed and all the investors should be allowed to invest in the scheme. The cap of income of Rs 1 million also to be removed and even people with higher income should also to be allowed to invest in the scheme. The deduction of 50% should be raised to 100% as available presently in ELSS scheme of MF u/s 80-C upto 0.1 million. Direct equity option should not be allowed as it requires in depth research and analysis which is not easy for lay investor.''
