Govt takes steps to encourage small investors

RGESS will provide tax benefits

Finance Minister P Chidambaram on Friday approved an equity scheme aimed at encouraging small investors in stocks.

 The Rajiv Gandhi Equity Savings Scheme (RGESS), which was announced in the Budget 2012-13, is aimed at encouraging the small and first-time investors as it also extend tax benefits on investment in equity markets.

Itwill provide tax benefits to new investors who invest up to Rs 50,000 and whose annual income is below Rs 10 lakh, Chidambaram told reporters here. Among other things, the scheme allows an investor to invest in initial and follow-on-public offerings of PSUs with turnover more than Rs 4,000 crore.

The Department of Revenue would soon notify the scheme and market regulator Sebi will be issuing relevant circulars to operationalise it in two weeks. Along with the scheme to make capital market more investor-friendly, the Finance Minister also announced measures to make foreign borrowings cheaper by reducing the withholding tax on overseas borrowings to 5 per cent from the existing 20 per cent.

In RGESS, an investor can put in money through mutual funds and exchange traded funds and the investments will be locked in for a period of three years.The Centre aims to raise Rs 30,000 crore from minority stake sale in PSUs in the current fiscal. However, with six months already over, no company has yet hit the market.