Union Budget 2019: Govt working on tax sops for retail investors in CPSE, Bharat-22 ETF

The government is working on a proposal to extend tax benefits to retail investors in its two exchange traded funds - CPSE and Bharat-22 ETF

Press Trust of India July 01, 2019 13:46:31 IST
Union Budget 2019: Govt working on tax sops for retail investors in CPSE, Bharat-22 ETF
  • As per the plan chalked out by the DIPAM, retail investors in CPSE and Bharat-22 ETF would be given option to enjoy tax breaks just like investors in ELSS mutual funds

  • Their investments would be locked-in for three years

  • These investors can also choose to not opt for ELSS category and can continue to trade in their units freely

New Delhi: The government is working on a proposal to extend tax benefits to retail investors in its two exchange traded funds - CPSE and Bharat-22 ETF.

The Department of Investment and Public Asset Management (DIPAM) has written to the Central Board of Direct Taxes (CBDT), seeking their opinion on whether equity linked saving scheme (ELSS) benefit under section 80C of Income Tax Act can be extended to retail investors of these ETFs, an official has said.

As per the plan chalked out by the DIPAM, retail investors in CPSE and Bharat-22 ETF would be given option to enjoy tax breaks just like investors in ELSS mutual funds. However, their investments would be locked-in for three years.

Union Budget 2019 Govt working on tax sops for retail investors in CPSE Bharat22 ETF

Representational image. Reuters.

These investors can also choose to not opt for ELSS category and can continue to trade in their units freely.

"We have written to the tax department seeking their opinion on whether ELSS benefits can be extended to CPSE and Bharat-22 ETF," the official told PTI.

If the CBDT, which is the apex decision making body for direct tax matter, gives concurrence, then DIPAM would work out a final plan and an announcement may be made in the 2019-20 Budget to be unveiled on 5 July.

Though extending ELSS benefits to the existing ETFs would not add to the government's disinvestment coffers, but it would stimulate retail investments in ETFs and also encourage household savings.

Currently, investments made in ELSS MFs are eligible for tax deduction of up to Rs 1.50 lakh under section 80C of the I-T Act, with a mandatory three-year lock-in period.

The government, currently, has two exchange-traded funds - CPSE ETF and Bharat-22 ETF - listed on domestic exchanges. ETFs function like a mutual fund scheme and have underlying assets of government-owned companies.

Separately, it has also kickstarted work on launching an ETF consisting of stocks of state-owned banks, insurers and financial institutions this fiscal and has invited bids from advisors to explore its feasibility.

The plan to launch a financial sector ETF comes on the back of the government seeing huge investor demand for two existing ETFs. It has raised Rs 32,900 crore through two tranches and an additional fund offer of Bharat-22 ETF, and Rs 38,000 crore in five tranches of CPSE ETF in the domestic market.

The government had raised about Rs 85,000 crore from CPSE disinvestment last fiscal. For the current fiscal, the target is Rs 90,000 crore.

Follow full coverage of Union Budget 2019-20 here

Updated Date:

also read

Market Roundup: Sensex jumps 260 pts, Nifty tops 14,550; today's top gainers and losers
Business

Market Roundup: Sensex jumps 260 pts, Nifty tops 14,550; today's top gainers and losers

After gyrating 877 points during the day, the 30-share BSE index ended 259.62 points or 0.53 per cent higher at 48,803.68

Market Roundup: Sensex crashes 1,700 points, Nifty below 14,400 amid surge in COVID-19 cases
Business

Market Roundup: Sensex crashes 1,700 points, Nifty below 14,400 amid surge in COVID-19 cases

Market indices fell around 3.5 percent on Monday, 12 April amid rising COVID-19 cases and vaccine supply crunch in the country

Market Roundup: Indices gain over 1.3%; Mahindra and Mahindra, Bajaj Finserv among top gainers
Business

Market Roundup: Indices gain over 1.3%; Mahindra and Mahindra, Bajaj Finserv among top gainers

After falling by around 3.5 percent on Monday, the BSE Sensex reclaimed the 48,500 mark while the NSE Nifty traded above 14,500