Par panel for more tax benefits on savings, review of RGESS

Expressing concerns over the lukewarm response to Rajiv Gandhi Equity Savings Scheme (RGESS), a Parliamentary panel today asked the Finance Ministry to review the scheme and formulate alternative proposals to encourage savings.

The Standing Committee on Finance in its report said RGESS has not found "much favour" with investors, as the amount invested through this scheme was only Rs 51.78 crore involving about 21,000 accounts at the end of March 2013.

"The Committee would thus like the (Finance) Ministry to review the scheme in its practical utility and accordingly formulate alternative proposals to encourage savings through measures such as raising the exemption limit of Rs 1 lakh under Section 80 C of the I-T Act," the report tabled in Parliament said.

RGESS was notified in November, 2012 as tax saving scheme.

Under the scheme to encourage investments in capital market, a new investor with annual income up to Rs 12 lakh would get tax benefits on investments up to Rs 50,000.

The panel, which is headed by Yashwant Sinha, further suggested that the TDS limit on Term Deposits with banks may be enhanced to make them an attractive instrument, as a declining trend has been noticed in recent years in these deposits.

On the proposal with regard to Securities Transaction Tax (STT) and Commodities Transaction Tax (CTT), the Committee reiterated its earlier recommendation for phasing out of STT and suggested the Finance Ministry to conduct a study on the impact of CTT, especially on food inflation.