Birla Sun Life and Sundaram Mutual Fund have filed offer documents with SEBI to launch tax saving scheme - Rajiv Gandhi Equity Savings Scheme (RGESS). Birla Sun Life has sought SEBI approval to launch Series 2 and 3 while Sundaram has filed offer documents to seek approval for Series 1 to 5. UTI Mutual Fund is also planning to come out with Series 2 RGESS soon.
Only six fund houses had launched RGESS when the scheme was introduced last year. ETFs which met the RGESS investment criteria were also eligible for investors to avail tax benefits under RGESS.
HDFC’s RGESS collected Rs. 105 crore while the other five players (IDBI, Birla Sun Life, DSP Black Rock, LIC Nomura and UTI) collectively collected roughly around Rs. 100 crore.
Fund houses are not enthused about RGESS this year due to the tepid response from investors and the challenges in marketing RGESS. Fund houses are required to collect a minimum of Rs. 10 crore in RGESS.
“It is difficult to market RGESS. The industry collected meagre amounts in RGESS despite the huge effort put in to popularize it. Even distributors were not enthused about selling RGESS,” said Debasish Mallick, MD & CEO, IDBI Mutual Fund. He believes that ELSS can attract investors this year if markets perform well.
“RGESS doesn’t not have a large market. It is difficult to identify first time investors. A lot of education and awareness is required. Marketing RGESS is also a challenge,” said the product head of a bank sponsored AMC.
There are 21 RGESS funds currently. Only first time retail investors who have income up to 12 lakh are eligible to avail tax benefits in RGESS from April 2013. Investors get 50% tax benefit on a maximum investment of up to Rs. 50000. Investors who do not qualify for tax benefits are also allowed to invest in RGESS.
Fund officials say that the scope of RGESS should be broad based to attract more investors.
“Distributors will sell RGESS if it is saleable. The interest seems to be very low this year. The government should broad base the eligibility criteria,” said the sales head of a fund house which launched RGESS last year.
There are 20,022 RGESS accounts with CDSL and 11,714 with NSDL.
