Fund houses are rushing to launch schemes that will be eligible for tax sops under the Rajiv Gandhi Equity Savings Scheme (RGESS), which was recently approved by the government. In past few weeks, IDBI MF, SBI MF, DSP BlackRock Investment Manager and Reliance MF have filed their offer document to launch schemes that will come under the RGESS ambit.
DSP BlackRock RGESS Fund ? Series 1 to 5 and IDBI Rajiv Gandhi Equity Savings Scheme ? Series 1 are closed-ended schemes that will invest in eligible securities as per RGESS, 2012.
SBI RGESS Tax Saving Fund is an open-ended equity scheme. Reliance MF’s R*Shares CNX 100 Fund will be an ETF tracking CNX 100.
Fund houses such as Kotak MF, Birla Sun Life MF and ICICI Prudential may also file offer documents to launch schemes under RGESS, said sources. ICICI’s existing SPICE ETF qualifies under RGESS but the fund house plans to file offer documents for six more ETFs, three of which may be eligible under RGESS, according to sources. ?RGESS is an obvious opportunity and my guess is that sooner or later most of the fund houses will either launch or reposition existing funds to bring them under RGESS ambit,? said Dhruva Chatterji, a senior research analyst, Morningstar India.
Market participants believe as a product RGESS seems to be a little confusing at present because of factors such as a flexible lock-in. However, they believe that its acceptablity could grow over time. ?It is too early to guess the kind of response the scheme will elicit. But there is likely to be sufficient interest as products offering any kind of tax benefit are always welcomed by retail investors,? said Ajit Menon, executive VP and head of sales, DSP BlackRock Investment Manager.
According to Chatterji, the fact that RGESS has a separate tax benefit and is earmarked as a separate tax instrument may work in its favour. He said the health of the Indian equity market and a better understanding of the product are also crucial in aiding the product’s popularity. RGESS is applicable to first-time investors who invest up to R50,000 and don?t earn more than R10 lakh annually. Investors get to avail one-time tax benefits under the new section 80CCG.
According to the Sebi circular detailing the scheme, units of Exchange Traded Funds (ETFs) or Mutual Fund (MF) schemes with eligible securities as underlying can be brought under the ambit of RGESS. Eligible securities can fall in the list of equity declared as ?BSE-100? or ?CNX-100? by BSE and NSE or equity shares of public sector enterprises categorised as Maharatna, Navratna or Miniratna by the government.
The RGESS was initially proposed in the Union Budget 2012-13 to encourage flow of saving in financial instruments and improve the depths of domestic capital market.
Tax sops
* IDBI, SBI, DSP BlackRock & Reliance MF have filed offer documents to launch schemes under RGESS
* Kotak MF, Birla Sun Life MF and ICICI Prudential may also file offer documents to launch schemes under RGESS
* Separate tax benefit under 80CCG may work in favour of RGESS
