Union Budget 2012: Finance Minister introduces tax exemption scheme for stock market investments

MUMBAI: The Finance Minister has introduced a tax exemption scheme for stock market investments in the Union Budget of 2012-13 to draw new retail investors to equities. The scheme, named Rajiv Gandhi Equity Savings Scheme, will allow 50% tax deduction for those whose annual income is below Rs 10 lakh and who invest up to Rs 50,000 in stocks subject to a three -year lock in.

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For instance, an assessee who invests Rs 50,000 in equuties stands to get income tax deduction on Rs 25000, if her annual income is below Rs 10 lakh.

"This is a good move as it will compel people to save in equities," said Narayan SA, president, commercial banking and capital markets, Kotak Mahindra Bank.

Brokers said the move will prompt more retail investors to invest in equity to reduce their short-term capital gains tax.