Rajiv Gandhi equity scheme to be made tax efficient

In a bid to tap retail investors' participation in equity market, government may revisit the existing tax provisions in the Rajiv Gandhi Equity Savings Scheme (RGESS) in the forthcoming Budget and make the instrument tax efficient.“I have assured the regulators that we will take the opportunity of the next Budget and the next Finance Bill to revisit the section and in the light of experience gained in designing the RGESS, we will make changes to that section so that the scheme become attractive to retail investors," said P Chidambaram, Union finance minister while launching RGESS formally on Saturday.The finance minister is of the view that, RGESS should be extended to other asset classes like derivatives to channelize savings into this direction.RGESS was introduced in FY13 budget for giving tax benefits to first times investors in the stock market under the new clause of deduction section 80 CC G. For investors whose income is less than Rs.10 lakh can avail a tax break up to 50% of the amount invested in equity. Investments in the subsequent years are not counted for the tax benefits.“We feel that the provision of 50 % of the contribution up to Rs. 50,000as deduction is not an adequate incentive. We need to revisit this provision and also make it a permanent instrument of tax saving, ” Chidambaram added.According to finance minister, convergence of Know your customer norms (KYC) for different financial sector regulators is necessary to ensure retail participation in the equity market."I think it is very important that KYC norms for all intermediaries, market regulator should converge and become one set of KYC norms. The next step is to converge the KYC norms for different set of regulators," said Chidambaram."If you ask too many questions before an investor can open an account or participate, you frighten him away," he added.