After General Anti Avoidance Rules (GAAR) and the Retrospective Amendment, now the Rajiv Gandhi Equity Scheme is likely to be modified. All three were key proposals in Pranab Mukherjee’s Budget presented on March 16.
The Finance Ministry has indicated that investments through mutual funds could also be allowed tax incentives in the Rajiv Gandhi Equity Scheme.
According to the original proposal, investment in equity by a first time investor will be eligible for deduction up to Rs 25,000 from his taxable income.
Any change in the Budget proposal will require moving an amendment in Parliament. Alternatively, as soon as the session is over, the Government can also bring in an ordinance to effect the change.
According to Finance Minister P. Chidambaram, the Government has taken note of the recommendation of SEBI that the Rajiv Gandhi Equity Savings Scheme (RGESS) should also “provide for investments in equity schemes of mutual funds which have the securities allowed under RGESS.”
“I have asked the Department of Economic Affairs, Capital Markets Division, to examine the recommendation of SEBI and I expect that it would be possible to take a decision shortly,” he said in a statement, while reacting to the decisions taken by the SEBI board on Thursday.
The market regulator took a slew of measures to revive and revitalise the mutual fund and primary market.
Chidambaram hoped these measures will stimulate financial savings among households as well as give a fillip to the mutual fund industry.
More measures coming
“More and more households should be encouraged to save in financial instruments rather than in gold,” he said.
The Minister also assured that more measures were in the pipeline. “There are a number of other suggestions which are under consideration by the Government. When U. K. Sinha, Chairman, SEBI, called on me on August 14, 2012, I had requested him to examine those suggestions independently and advise me. The examination by the Government and SEBI is likely to be completed in the next two weeks,” he said.
Now the Minister has requested the SEBI chief to schedule another meeting of the board in early September when some more decisions can be taken on the suggestions that are under examination.
“More and more households should be encouraged to save in financial instruments rather than in gold.”