Union Budget 2019 India: Union Minister of Finance Nirmala Sitharaman in her Budget 2019 speech has proposed to extend the benefit of section 80C for investments made in Central Public Sector Enterprise (CPSE) exchange traded fund (ETF). The tax saving will be similar to the tax benefit available in the equity linked savings scheme (ELSS) as currently available to mutual funds.
Till now, taxpayers had only the ELSS to choose that had the shortest lock-in period of 3 years.
The units of CPSE ETF are listed on stock exchanges such as BSE and NSE and the investor can purchase the units at a price prevailing during the trading hours.
Taxpayers investing with the objective of tax saving will have to keep the units locked-in for three years. The actual details are still to come out but going by the mention of ELSS, it seems, the lock-in will be for 3 years. To invest, one needs to have a demat account and purchase CPSE ETF units online during the trading hours.
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The CPSE ETF is made up of equity investments in 10 of India's largest public sector companies. The biggest of these are ONGC, REC, Coal India, Container Corp, Oil India, Power Finance, GAIL, BEL, EIL, and Indian Oil. As the stocks are PSU, one needs to be aware that the investment will be restricted to PSU companies only.