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MFs queue up to tap Rajiv scheme

business Updated: Feb 15, 2013 21:43 IST
Sachin Kumar
Sachin Kumar
Hindustan Times
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Mutual fund companies are lining up a slew of funds under the Rajiv Gandhi Equity Savings Scheme (RGESS), following its launch last week. So far five companies — LIC Nomura Mutual Fund, UTI Mutual Fund, SBI Mutual Fund, IDBI Mutual Fund and DSP Black Rock — have launched RGESS funds, open for subscription for retail investors.

RGESS was announced by the government in the last budget to encourage small investors to invest in the stock market. It exempts 50% of the investment from any kind of tax obligation which means that if one invests Rs 50,000, the amount eligible for tax deduction from his/her income will be Rs 25,000.

"The maximum amount eligible for claiming benefit under RGESS is Rs 50,000 and the scheme has a lock-in period of three years," said Nilesh Sathe, director and CEO, LIC Mutual Fund.

“The allowed tax deduction under section 80CCG will be over and above the Rs 1 lakh limit permitted under section 80C of the Income Tax Act, making it attractive for the retail investors,” said Raja R, head products, UTI Mutual Fund. “One must make this Rs 50,000 investment only if he/she has exhausted the R1 lakh limit under section 80C,” he said.

The scheme has brought cheers to the Indian mutual fund industry, which has been under pressure due to withdrawal of funds by retail investors from equity schemes.
“Launch of RGESS is important step for mutual fund industry because it will bring new investors to equity schemes,” said Sathe. “We hope to garner Rs 100 crore from around 20,000 retail investors from this scheme,” he said.

Experts say these schemes suit investors who have no time to monitor investments on a daily basis.