Under the proposed scheme, the investors would be allowed to invest up to Rs50,000 in a year, with a lock-in period of 3 years

New Delhi: The finance ministry is likely to come out with details of the Rajiv Gandhi Equity Scheme, which is aimed at boosting retail investments in capital market, by the end of this month, reports PTI.

"We are working on it and the norms should be ready by this month end," a senior finance ministry official said.

The market regulator, the Securities and Exchange Board of India (SEBI), has been pitching for routing this tax-saving equity scheme through mutual fund so as to minimise the risks associated with direct stock investments for the investors.

In order to make the scheme more attractive for retail investors, the ministry has been considering reducing the lock-in period under the scheme to one year from the proposed three years.

Former finance minister Pranab Mukherjee, in the Budget for 2012-13, had announced introduction of the Rajiv Gandhi Equity Scheme under which 50% tax deduction would be provided to retail investors with annual income less than Rs10 lakh.

Under the proposed scheme, investors would be allowed to invest up to Rs50,000 in a year, with a lock-in period of three years.

The scheme, it was proposed, could be availed once in a life time by investors. It was the first ever, tax benefit scheme in India, for direct investment in equities to encourage retail investors' participation. By offering this scheme, the government aims at channelizing household savings into stock markets.

In 2010-11, net inflow in equity schemes of mutual fund had declined by Rs13,000 crore, but in the following year, it is positive by few hundred crore, the official said, adding the number of folios that have declined.

The ministry, he added, was also working on several other issues with a view to streamlining the path for investment by qualified financial institutions (QFIs).

"There are 57 action points we are working on for streamlining the QFI investment process. We will be addressing them and also the withholding tax issue," he said.

The ministry is also considering a proposal to bring the taxation structure of the QFIs in line with that of the foreign institutional investors (FIIs). A short-term capital gain tax of 15% would be deducted at source in case the QFI makes a profit on investment.

A qualified foreign institutional investor (QFI) is an individual, group or association in a foreign country that is compliant with financial action task force (FATF) standards. They do not include FIIs/sub-accounts.

The finance ministry had last month conducted roadshows in five nations in the Middle-East-Riyadh, Dubai, Muscat, Kuwait and Bahrain-projecting India as an "incredible investment destination".