Rajiv Gandhi Equity Scheme to pep up retail investors

The Rajiv Gandhi Equity Scheme announced by the Finance Minister is set to revive the retail investor interest in the equity markets.

The scheme would allow for deduction from taxable income 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 10 lakh. Also, the scheme will have a lock-in period of 3 years.

This scheme is meant for entirely new investors, who will get the tax benefit, which in in addition to the existing benefit of Rs 1 lakh on various investment schemes.
Angel Broking’s VP (Research) Vaibhav Agrawal said the  dmat account holders currently accounts for about 1.5 per cent of India’s population, this equity scheme to should help ramp up numbers in due course. But declaration of investment in shares for income tax returns will be needed for the scheme, while in general most existing investors don’t do so now. Agrawal said, this is essentially meant for new investors who are more keen on saving the benefit of income tax foremost than anything.

As such, more retail investors hopefully coming into the market to avail the tax benefit of Rs 50,000 for investment into stocks augurs well for the long term health of the broking industry.

Centrum Broking CEO K Sandeep Nayak said the broking industry will get a big boost with it to revive the retail investor interest in the equity markets. This coupled with the reduction in STT by 20 per cent on investment transactions is very positive for capital market intermediaries. As the domestic stock market is still being influenced by global liquidity, and that would remain the predominant short term force in the market, reforms in the financial sector have been pursued with the objective of more efficient market intermediation between savers and investors.

Other positive steps for capital market in the new fiscal will be simplifying the process of issuing IPOs, lowering their costs and helping companies reach more retail investors in small towns. To achieve this, Mukherjee said in addition to the existing IPO process he has proposed to make it mandatory for companies to issue IPOs of Rs 10 crore and above in electronic form through nationwide broker network of stock exchanges.