Rajiv Gandhi Equity Scheme is brilliant….

Hindu Business Line is a good newspaper….and they normally do good stories. Here is a story based on THEIR reporting of the Rajiv Gandhi Equity Scheme.

Most people have not been able to comment on the RGES because the details are sketchy.

From the Hindu Business Line article, I learn that:

It is a scheme for encouraging equity investments (not that the ‘Babu’ sitting in Delhi knows the difference between the investor and the trader).

It will have a LOCK-IN of 3 years (The scheme will have a lock-in period of 3 years,” said Mr Pranab Mukherjee, Finance Minister, Government of India)

The deduction will be 50% of the Capital Gains Tax (let us say you are a person in the 20% slab you will pay 10% as cap gain). For example if your cost was Rs. 10,000 and you were selling it for Rs. 14,000 – you will make a profit of Rs. 4000. On this you would have paid 20% of 4k = Rs. 800.

Because of this provision, now you would be paying Rs. 400 (50% discount).

I have a few questions to ask:

– if there is a LOCK IN of 3 years, where is the question of SHORT TERM CAPITAL gains at all?

– what is this Rs. 50,000? Investment or profit?

-from looks of it,  it is poorly worded, and as usual confusing

-Government wording is tough to understand for sure!!

PS: this is COMPLETELY WRONG I have written it as a JOKE. Many people reading my blog lose the humour……..and get confused. Hence this clarification.

Here is an article which is at least NOT inaccurate about the facts:

 http://www.moneylife.in/article/rajiv-gandhi-equity-savings-scheme-how-to-make-the-best-of-a-good-or-bad-bargain/24422.html

but for the real thing to emerge wait for the bill to be passed.

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4 Responses to “Rajiv Gandhi Equity Scheme is brilliant….”

  1. Subra,
    Forgive me, I got the humor, but lost the clarification!
    We already have 0% capital gains tax on long term (> 1 Yr) equity investments. How does this scheme benefit above that? What does the 3-yr lockin give me as benefit? Is there a deduction available on the invested amount? Even that is not clear.
    And why the income limit of 10 L pa? By implication, do people who earn more than 10L p.a. already invest in stock market to the tune of more than 50,000? Also is the 10 L pa limit applicable in the year of investment or year of redemption (sale)?
    It should be called scheme for brilliant people only! Normal people’s brains will become bhoosa (chaff) trying to understand it.

  2. this is a pyscho scheme dreamed up by idiots.to put it mildly.limiting investors to below 10 lacs and ASKING the middle and low-middle income people (4 to 10 lac band) to invest/speculate DIRECTLY in equities (no mention of MF) it is just bonkers.and as ila patnaik pointed out so eloquently in the indian express,the govt at the same time has increased taxes on the natural savings instrument(gold) of this band of people just because it is afraid of the competition gold is giving to the rupee.

  3. Subra,
    20% of 4K is 800, and NOT 2000 as you have reported.

  4. dont think our babus are thick; devious, convoluted, obstructive, vengeful (ask vodafone!) but certainly not thick.
    Perhaps the real reason will out in due course, some FI or FII( PN) or some other joker may have already figured out a way to loot the public through this scheme.
    If it does turn out so, it would have been an aptly titled scheme!!

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