SEBI has directed stock exchanges, depositories, mutual funds, AMCs, Trustee Companies and Boards of Trustees of MFs to take necessary steps to implement the Rajiv Gandhi Equity Savings Scheme (RGESS). A notification for the RGESS was issued by the Ministry of Finance (MoF) on November 23, 2012. In light of that notification, the SEBI has clarified the following:
- For RGESS eligible close-ended MF schemes, advice given by AMCs to the depository for extinguishing units of close-ended schemes upon maturity of the scheme will be considered as settled through depository mechanism and therefore RGESS compliant. Also, AMCs will need to disclose that RGESS eligible ETFs and MF schemes are compliant with the guidelines notified by MoF on November 23, 2012, in the Scheme Information Document (SID) if it is a new scheme, or in an addendum for existing eligible schemes.
- The MoF notification provides that RGESS eligible securities credited to an investor’s demat account will automatically be subject to lock-in during the first year. The investor will need to specify (by filling up Form B), if he does not want such securities to be included within the above limit of investment. He will need to submit this form with its Depository Participant within 1 month from the date of transaction. For their part, Depositories may seek necessary transactional details from stock exchanges to enforce lock-in for transactions undertaken by investors through their RGESS designated demat account.
Meanwhile, stock exchanges have to provide a list of RGESS eligible stocks / ETFs / MF schemes on their website. MFs and exchanges, along with depositories, have been directed to ‘create wide publicity of the scheme among the investors and market participants, including through investor programs and displaying details on their website.’ They are also required to report the status of implementation of the provisions of this circular to SEBI.
Rajiv Gandhi Equity Savings Scheme had been announced in the Union Budget 2012-13 with the objective of encouraging the flow of savings in financial instruments and improving the depth of the domestic capital market. A new section, 80CCG, was introduced on ‘Deduction in respect of investment made under an equity savings scheme’ to give tax benefits to new investors investing up to Rs 50,000 whose gross total annual income is less than or equal to Rs 10 lakhs.
