The government on Friday extended the ambit of the Rajiv Gandhi Equity Scheme which offers tax sops to first-time retail investors to mutual funds and exchange-traded funds.

The scheme announced in the budget entails 50% deduction on equity investment up to Rs 50000. The benefit would, however, be limited to those with annual income of up to Rs 10 lakh.

"In addition, considering the requests from various stakeholders, exchange traded funds and mutual funds that have RGESS eligible securities as their underlying and are listed and traded in stock exchanges and settled through a depository mechanism have also been brought under RGESS," the finance ministry said in a statement.

In case of those opting for stocks the benefit will be available if the investment is in BSE 100 and CNX 100 and top public sector shares.

In addition a three-year lock-in has been proposed.

After the first year investors would be allowed to trade but maintain the minimum investment level for two more years.

Through the scheme the government is hoping to boost retail participation in equities and boost investor sentiment in the stock markets, especially when several PSUs issues are lined up.