Investors may be allowed to invest in shares of Public Sector Undertakings (PSUs), besides BSE-100 shares under the proposed Rajiv Gandhi Equity Scheme. Investments are also likely to face a reduced lock-in period. The lock-in period may be cut from the current three years to one year, with some conditions.
The revised norms form part of the new guidelines for the scheme, expected to be notified by the Finance Ministry within a month, sources said.
The Ministry held a meeting on Wednesday with stock exchanges and share brokers. According to a source, “PSU shares are relatively better in terms of fundamentals. At the same time, the one-time tax incentive for first-time investors will also help the Government's divestment programme.”
There was also a view that unless the lock-in period for the investment was reduced, the scheme would compare unfavourably with similar mutual fund schemes already in the market.
The scheme has proposed three-year lock in for an investment of Rs 50,000. “Three year lock-in makes this scheme similar to equity linked saving scheme (ELSS) type of mutual fund. However, ELSS provides deduction up to Rs 1 lakh for income tax relief, but under the proposed Rajiv Gandhi Equity Scheme, the maximum deduction will be Rs 25,000 only. So people will prefer ELSS,” another source said.
Call on Churning
The Ministry is now considering a suggestion to allow investors to churn their investment after one year. “The investor may exit from the initial investment, but within a fixed time he should be asked to make investment, so as to maintain Rs 50,000 for the remaining period of three years,” he explained.
He also clarified that such flexibility will help the investor to save tax, make money on investments and encourage him to invest further. However, an option of returning the tax benefit and completely exiting from the scheme is also likely to be provided.