In order to attract more retail investors into the stock markets, the Department of Disinvestment (DoD) has suggested tax incentives for small investors. The department has made a formal proposal for tax incentives to the Department of Economic Affairs (DEA) in the Finance Ministry.
Further, the DoD wants a broad based retail market to be created to get good value for the government stake sale planned in several PSUs. The DoD has been long trying to attract more retail investors into the equity market so that they can own a pie in the government companies as and when PSU stake sales happen. According to the DoD, a tax incentive will attract retail investors to equities of both public and private companies. Furthermore, it added that encouraging retail investors will ensure flow of savings into domestic capital markets which would improve its depth.
Currently, the government reserves 20 per cent of the issue size for retail investors, who are allowed to invest up to Rs 2 lakh in the Offer for Sale (OFS). Also a 5 per cent discount is offered to them over the bid price. However, the quota reserved for retail investors has not been fully subscribed in some of the big-ticket stake sales like Indian Oil Corp (IOC) and Coal India Ltd (CIL).