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The RGESS will be a constrained investment. Here’s why you should opt for an ELSS over it for now…

I am a first-time investor. I want to know if I should invest in a mutual fund or go for the Rajiv Gandhi Equity Savings Scheme.

The guidelines for the Rajiv Gandhi Equity Savings Scheme (RGESS) are out, but it will still take some more time for the eligible funds under this scheme to be announced. If you plan to invest to save taxes, you already have many options for the first Rs 100,000 under Section 80C of the Income Tax Act. Under the RGESS, you will be eligible only if you haven’t bought shares in a demat account as yet and your annual income must be Rs 10 lakh or less. If you fulfill these riders, you will be allowed to invest a maximum of Rs 50,000 under the RGESS and you will get a tax rebate on 50 per cent of your invested amount. Furthermore, the eligible funds under the RGESS will be constrained to invest only in large-cap stocks. Hence, with all of this in mind, we would recommend that you opt for a mutual fund right now. If saving taxes is your goal, invest in an ELSS fund with a long-term, systematic approach.

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