After allowing rural customers to trade in cash up to Rs 20,000 at one time and Rs 50,000 per annum, Sebi is now working on simplifying KYC process for them in a bid to bring more such investors to capital markets.
|Akhil Mittal, senior fund manager of Tata Asset Management says that investors whose investments in fixed maturity plans (FMPs) are nearing maturity are shifting to other products, especially hybrid or balanced funds, instead of rolling over the FMP. Fund managers are seeing investors move to both debt and equity oriented hybrid funds.|
|The Securities and Exchange Board of India (Sebi) wants to cut the timeline for Initial Public Offers (IPOs) and Follow-on Public Offers (FPO) of equity to four days. The move, if implemented, will see companies close their offerings and list the securities in the same week. It will also attract more investor participation, as their funds will be locked in for a shorter duration.|
|Making Know-Your-Client process easier for investors, Sebi today cleared a proposal to allow various market entities such as brokers and mutual funds to get investor details from centralised KYC agencies, rather than carrying out a fresh KYC verification procedure. Presently, there is an option available to a market intermediary that it may access the centralised KRA (KYC Registration Agency) system in case of a client who is already KYC compliant, or may also carry fresh KYC process. .At a board meeting in New Delhi, Thursday, Sebi decided to do away with the second option of fresh KYC processing being carried out, if the concerned investor has once gone through the KYC procedure with any of the registered intermediaries.|
Leading life insurance companies such as HDFC Life, Birla Sun Life and ICICI Prudential have shown interest in purchasing HSBC’s stake in its three-cornered JV with two public sector banks. Two people with direct knowledge of the development said advisors to HSBC have approached the insurance companies, and the matter is under consideration.
Comparision of RGESS with the top tax saving schemes available in India:
|Eligibility||Annual Income less than 10 lakh.||None||None|
|Lock-in Period||1+2||3 years||15 Years|
|Tax Benefits||50% (80 CCG)||100% (80 C)||100% (80 C)|
|Maximum Investment for Deduction||Rs.50,000||Rs.100,000||Rs.100,000|
|Minimum Investment||NA||Rs.500 to Rs.5000||Rs.500|
|Need for DEMAT||Yes||No||No|
|Annual Return||Market Based||Market Based||8.8%|
|Interest Earned||Non Taxable||Non Taxable||Non Taxable|
|Risk||Medium to High||Medium to High||Low|
Rajiv Gandhi Equity Savings Scheme (RGESS)
|Who can invest in RGESS?||New retail investors with an annual income of less than 10 lakhs.|
|How much can I invest?||The maximum amount eligible for claiming benefit under RGESS is Rs. 50,000.|
|Tax Benefit||Deduction u/s 80 CCG, is available on 50% of the amount invested. The benefit is in addition to deduction available u/s Sec 80C.|
|Lock-in Period||3 years. Fixed lock-in during first year followed by a flexible lock-in for subsequent two years.|
AIM: To encourage the savings of the small investors in domestic capital market.
Rajiv Gandhi Equity Savings Scheme (RGESS) is a new equity tax advantage savings scheme for equity investors in India. The scheme got it’s approval on September 21, 2012. It is exclusively for the first time retail investors in securities market.
The investors who invest up to Rs.50,000 in ‘Eligible Securities’ and have gross total annual income less than or equal to Rs.10 Lakhs will benefit from a new section 80CCG under the Income Tax Act, 1961 on ‘Deduction in respect of investment under an equity savings scheme’ has been introduced to give tax benefits.
Let us say, you invest Rs.50,000 under RGESS, the amount eligible for tax deduction from your income will be Rs.25,000. Alternatively, if you invest Rs.40,000 under RGESS, the amount eligible for tax deduction will be Rs.20,000. So you may save about Rs.2,575, Rs.5,150 for income tax slabs 10% and 20% respectively under this scheme.
- Resident Individual
- Annual Income < =Rs. 10 lakh
- If Demat Account already Opened, No transactions in Equity or F&O
The tax deduction under RGESS shall be available to a new retail investor whose gross total income for the financial year (1 April to 31 March) in which the investment is made under the Scheme is less than or equal to 10 lakh rupees.
A new retail investor is defined as follows:
- Any resident Individual who has not opened a demat account and has not made any transactions in the equity or derivative segment as on the date of notification of the scheme i.e., November 23, 2012. OR
- Any resident Individual who has opened a demat account as a first holder, but has not transacted in the equity or derivate segment till November 23, 2012. OR
- Any resident Individual who has a demat account as a joint holder.
Lock In Period
The eligible securities brought into the demat account will be automatically locked-in from the date of investment till one year from the date of last purchase of RGESS eligible securities. This period is called ‘Fixed Lock-in’ during which you cannot pledge or sell these securities.
- Holding Period = 3 Years
- Fixed lock-in Period = 1 Year from the date of credit
- Flexible lock-in Period = 2 Years from the end of Fixed lock in period
During subsequent two years called as Flexible Lock-in, you can sell and buy RGESS securities. However, you will have to maintain the value of RGESS investment for cumulative period of 270 days during each of these two years.
Let us say, you have purchased eligible securities worth Rs. 50,000 in a RGESS designated demat account on December 31, 2012. The eligible securities will be in ‘Fixed lock-in’ till December 30, 2013 and for flexible lock-in till December 30, 2015.
In case you do not wish to claim tax deduction on a security, then a declaration in the prescribed format (Form B) should be submitted within one month from the date of credit to the DP.
Your demat account that was designated for RGESS will be converted into a regular or ordinary demat account at the end of the flexible lock-in period.
Illustration of RGESS lock-in period if investments are brought in at once.
Maximum Investment Limit
There is no cap on the amount of investment in RGESS eligible securities. However, Income Tax Deduction benefits under the scheme will be available for a maximum investment amount of Rs.50000. This deduction benefit is available only in the year of investment.
Mode of Holding
RGESS eligible securities must be held in dematerialised mode only.
The illustration for the Tax benefits is as below