The proposed Rajiv Gandhi Equity Savings Scheme (RGESS) is expected to come with safeguards that will permit small investors to purchase shares only in the top 100 stocks traded on BSE and NSE.
An exception is, however, expected to be made for public sector companies with the government likely to relax the rule to allow trading in stocks that are part of the top 500 list. The move is aimed at increasing retail participation in not just the stock market but also in disinvestment exercise.
The scheme will allow 50% deduction for those who invest up to Rs 50,000 in stocks, provided their taxable income is below Rs 10 lakh. While the funds will not be allowed to be withdrawn for three years, even churning of portfolio is not permitted during the first one year. The scheme can be availed only once in a lifetime. Details on the scheme are expected to be out in a month’s time.
The government has drawn upon the experience in Europe which had tried the model and increased retail participation in the 1970s. A similar scheme, with much higher cut-off, was first tried in France which was then used by Belgium, West Germany and Sweden.
THE finance ministry is also considering to reduce the lock-in period for Rajiv Gandhi Equity Savings Scheme to one year from the proposed three years to make it more attractive to retail investors.