Skip to main content

RGESS - Behind the Tax Sops are the Legal Tangles

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

The Indian stock market has attained a fair degree of maturity under the aegis of the regulator Securities and Exchange Board of India (Sebi). It has always been a concern of the government and Sebi to protect the retail investor and to make the market as granular as possible.


The scope of the Rajiv Gandhi Equity Savings Scheme (RGESS) has been widened in the recent budget. RGESS, crafted with the stated objective of 'encouraging the savings of small investors in the domestic capital market', basically entitles a 'new investor' to tax benefit in the equity shares of Maharatna, Navratna or Miniratna (collectively, 'Ratnas') companies, equities constituting two specified indices namely BSE100 and CNX100, units of designated Mutual Fund Schemes and primary issues of certain Public Sector Undertakings.


The Ratna stocks and other PSU stocks appear to have been dovetailed with index stocks and MF units, presumably to widen the spectrum of investment options. While there is nothing wrong in extending tax sops for certain specified investments, a conundrum of multi-dimensional legal conflicts lie below the subtle economics of tax incentives provided for investment in Ratna and PSU stocks.


'Dominant position' under the Competition Act 2002, means a position of strength enjoyed by an enterprise in the relevant market which enables it to operate independently of competitive forces, or affect its competitors or consumers in its favour. As far as the bourses are concerned, the government does qualify to be an enterprise enjoying a dominant position. The fact that the government has inherent powers to remove a member of Sebi from office, compounds the government's position of dominance.


There shall be an abuse of dominant position if an enterprise indulges in a practice resulting in the denial of market access (Section 4 of the Competition Act).


This phenomenon is known as 'Essential Facility Doctrine' (EFD). The three major tests of EFD are

(i) the facility must be controlled by a dominant enterprise in the relevant market (the relevant market is the 'Capital Market'; taxation and tax incentives are controlled by the 'enterprise' called government),

(ii) competing enterprises should lack a realistic ability to reproduce the facility, (other enterprises in the private sector do not have any realistic ability to provide any tax incentive)

(iii) access to the facility is necessary in order to compete in the relevant market; and it must be feasible to provide access to the facility (competing enterprises do not have access to the taxation regime; neither is it feasible for the law to provide them with any access to taxation, and incentives thereof).

 

Further, there shall also be an abuse of dominant position if an enterprise concludes contracts that are subject to acceptance of supplementary obligations which have no connection with the subject of such contracts. RGESS is a scheme by which the promoter of a company causes conclusion of contract (eg. subscription in IPOs of specified PSUs, primarily a securities contract) between it and the investor subject to supplementary obligations (like lock in of such securities for three years) having no relevance to the tax rebate (incentive) being offered to such investors.


Sebi (ICDR) Regulations 2009 (Regulation 59) stipulates that no person connected with an issue shall offer any incentive, direct or indirect, whether in cash, kind, services or otherwise to any person for making an application for allotment of securities. Mutual funds and broking houses are bound to make upfront risk disclosures.


RGESS apparently has chosen not to counsel the 'new' investor on the risk of losing his entire investment due to inherent risks. Here, one is constrained to appreciate that the objective of RGESS is to channelise the hard-earned savings of small investors into the domestic capital market.


The government ought to have addressed the conflict of interest arising out of its dual role, one as the 'government' and the other as a promoter of Ratna companies and other PSUs, while formulating RGESS. It may be idle to contest that a promoter does not have any vested interest in his company. The Parliament enacted the Sebi Act with the twin objective of protecting the interests of investors and developing and regulating the securities market. Ironically, through a government notification, the regulator is compelled to instruct market intermediaries to facilitate a practice that is far from fair!

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax PlanInvest Online
  2. HDFC TaxSaverInvest Online
  3. DSP BlackRock Tax Saver FundInvest Online
  4. Reliance Tax Saver (ELSS) FundInvest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) FundInvest Online
  7. SBI Magnum Tax Gain Scheme 1993Invest Online
  8. Sundaram Tax SaverInvest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFundsInvest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...
Read more

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...
Read more

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...
Read more

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...
Read more

ICICI Prudential Value Fund Series I

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   Performance of the scheme will be benchmarked to the S&P BSE 500 index ICICI Prudential Value Fund is a closeended equity scheme. The scheme will have tenure of three years (1095 days) from the date of allotment of units. Units of the scheme will be fully redeemed at the end of the maturity period, unless rolled over. NFO PERIOD:   The NFO is open from October 18 to 28. The minimum subscription during the NFO period is Rs 5,000. SCHEME OBJECTIVE:   The scheme aims to provide long-term capital growth by investing in a well-diversified portfolio of equity and equity-related securities. INVESTMENT STRATEGY:     The fund proposes to invest in stocks that are trading at a huge discount in the BSE 500 index and plans to book profit and distribute dividen...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now