SEBI looking at I-T relief for RGESS investors in failed NFOs
Moneylife Digital Team 04 April 2013

SEBI is looking to find a process which guarantees that tax savers who invested under the RGESS are not affected by matters completely beyond their control, like an NFO failure

 
Market regulator Securities and Exchange Board of India (SEBI) said it is looking at how the interests of investors in the Rajiv Gandhi Equity Savings Scheme (RGESS) can be safeguarded with regard to income tax (I-T) relief in case the fund houses return their money for failing to raise the targeted amount.
 
SEBI chairman UK Sinha told reporters that “We are looking into it and will soon come out with an approach paper on this. We do not want the people, who have legitimately applied in the hope of getting tax relief, to suffer. I am not saying there will be relaxations; I am just saying we are looking into it.” 
 
As per SEBI regulations, if a new fund offer (NFO) is not able to garner the minimum amount, the fund house has to return the money to investors within a certain period, failing which it has to pay penal interest of 15% to the investor.
 
However, in that case, the investors would miss income tax relief to which they were otherwise entitled.
 
“We have to find a process where the tax-savers are not left with disadvantages for reasons beyond their control,” Sinha said.
 
With some fund houses not being able to mop up the minimum subscription for the RGESS, they would be required to return the money to all those who had invested in the scheme.
 
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