All you wanted to know about RGESS

Below is the verbatim transcript of an interview aired on CNBC-TV18.

Q: The Rajiv Gandhi Equity Savings Scheme (RGESS) has got some more sops added to it, the limit has been increased and the time period for which one can put in money has been increased. Is all this good enough, how has been the performance on the ground and what would you advise people to do?

A: Rajiv Gandhi Equity Savings Scheme has come up with enhanced features into it so more steroids in it in terms of taking call from retail investors' point of view. The limit has gone up from 10 lakh to 12 lakh and that is positive because that now covers 30 percent tax bracket people also.

If one goes by the simple mathematics then there is a potential to save Rs 7,500, which was earlier only Rs 5,000. It has spread out over three years, is also an advantage because it helps one to take benefit over three years period.

Therefore, the goodies are very much in advantage and another thing, which is a by-product to this is that finance minister and government is trying to encourage people to open demat accounts because somewhere equity cult and culture has to build in. Right now foreigners are buying more equity than Indians. 

Union Budget 2013 - 14: Tax sops in RGESS extended to 3 years: Chidambaram

Q: A lot of people who know about market are probably looking for it in the names of their sons or relatives who have not already invested in market. Is that how it can be interpreted, is that an available loophole or is it that something has been put in and one cannot use this ploy to get a relative in who does not have share positions already?

A: It is not a loophole. It is a normal product because most of the time these kinds of products with this kind of tax benefits does not takeoff immediately even the equity linked saving schemes (ELSS) took their time to build up and even with RGESS. Therefore, the most knowledgeable customer will take the benefit of these kinds of features and tax planning and others will follow slowly and effectively.

However, one good thing, which has started happening, is in the intermediation circles people have started going back to the investors and started talking about it. I think that is a big difference, which has happened because of RGESS, which was not there earlier and that is a very big positive.

Caller Q: I want to purchase one health insurance policy for myself and for my daughter. I would like to prefer ICICI so what care should I take for that?

A: ICICI Lombard is a good product to have. They have good servicing and technology to support, which will help you buy policy. However, along with this if you can look at claim settlement ratio and also look at what kind of servicing team they have. Do they have an internal servicing ream or they have third party servicing team. If these two filters can also be played, it will help you buy a good product.

So, keeping these two filters along with ICICI Lombard we will advice if you can look at Bajaj Allianz because Bajaj Allianz has better claim settlement ratio in the industry and they have in-house servicing team, which helps you settle your claims much more effectively over a period of time. Another factor is loading that means if you go in for increase cover later point of time, what kind of loading happens. So, that is where it is comparative between ICICI and Bajaj Allianz but between ICICI and Bajaj Allianz you can choose anyone of them.