Rajiv Gandhi Equity Saving Scheme 50% saving by Investing- Rs 50000

Rajiv Gandhi Equity Scheme

Rajiv Gandhi Equity Scheme

Rajiv Gandhi Equity Saving Scheme to allow for income tax deduction of 50% to new retail investors (whose annual income is below Rs 10 lakh), who invest upto Rs 50,000 directly in equities.

Objective of RGESS:

To encourage flow of savings of small investors in domestic capital market.

Key Highlights of RGESS

  • Investment in eligible securities up to Rs.50,000/- will get 50% deduction of the amount invested.
  • Tax payers in 10% and 20% only are eligible.
  • Maximum tax benefit up to Rs.5,150/-.
  • This is over and above deductions for investment made U/s 80-C.

Eligible Investors for RGESS

  • Gross total annual income less than Rs.10 lacs.
  • Who has not opened a Demat account till 23/11/2012.
  • Who has opened a Demat account but has not transacted in the Equity or derivative segment till 23/11/2012.
  • Who has a Demat account but only as a joint holder

Rajiv Gandhi Equity Savings Scheme – Eligible Securities

  • Equity Shares of Companies included in
  1. Eligible Securities
  2. CNX 100 & BSE 100
  3. PSU Maharatna, Navratna & Miniratna
  4. Any FPO of above mentioned securities
  • ETFs & MFs with RGESS eligible securities as underlying.
  • NFOs of eligible Mutual Funds Scheme
  • IPO of eligible PSU’s

RGESS - Procedures & formalities

  • Open a Demat account by fulfilling all KYC formalities along with a declaration in prescribed format.
  • Can also designate existing Demat account by providing the declaration to that effect

Mode of investing

  • Can buy eligible securities from secondary market.
  • Can invest in eligible MF schemes by providing Demat account details in the application form for receiving credit.
  • Can invest in eligible IPOs / NFOs by providing Demat account details for receiving credit

Lock-in period

Fixed lock-in period Flexible lock-in period
1 year Subsequent 2 years.
Securities can not besold/pledged during thisperiod. RGESS securities can be bought and sold.
Value of RGESS investment to be maintained for cumulative period of 270 days during each of these 2 years.

Important Change for year investment made in Financial 2013-2014 (as per budget 2013)

Two major changes for RGESS are made in Budget 2013.

  • As of now only tax payers whose taxable income less than or equal to Rs.10,00,000 are eligible for investment in this scheme. Now this limit raised to Rs.12,00,000.
  • One more important change in RGESS, you can claim the benefit instead of current one year to three years. It means that you can carry forward the current year investment tax benefit till 3 years. 

Mutual Funds Offering RGESS

Mutual Fund houses have lined up exclusive schemes that would invest in RGESS eligible securities. By investing in them, investors will be eligible for additional tax benefit apart.
DSP BR RGESS Series 1 A 3 year close ended Equity Fund.
IDBI RGESS Series 1 Plan A A 3 year close ended Equity Fund.
SBI Sensex ETF An Exchange Traded Fund tracking BSE Sensex.
UTI RGESS Fund A 3 year close ended Index Fund tracking Nifty.

Final Conclusion : Should you invest in RGESS

  • RGESS is good for tax payer whose total Income is less then Rs 10 lac.
  • Please invest in RGESS only if you have used limit of Rs 1 lac as per Section 80C.
  • Please note mutual funds are subject to market risk, you may prefer earning from PPF 8.8% p.a rather from earning in RGESS scheme.

FAQ’s on RGESS (Rajiv Gandhi Equity Scheme)

Can NRI take tax benefit under RGESS ? Praveen, New Jersey

This scheme is only applicable for Resident Investors who,  are investing in equity for first time. NRI‘s will not be able to take benefit under RGESS.

Que: I have invested Rs 50000/- in Feb 2013. Can i take Benefit of RSection 80CCG in next year 2013-2014 also? Sumit, Gurgaon

Income tax Deduction will not be allowed in next year, if you have already invested full Rs 50000/-   in RGESS during the current year.

Que: My Rs 50000/- limit is exhausted, do I have to open new Demat Account?

If you have invested full Rs 50000/-, this will be considered for lock in period of  years.

Pleas submit form B to your depository participant then these shares over and above Rs 50000/- will not be considered for lock in period.

Que: What is the impact in case the equities purchased under the Rajiv Gandhi Equity Savings Scheme 2012 are sold before the lock in period of three years? David, Kerala

Ans. In case the shares are sold away before the statutory lock in period of three years, in that situation the deduction under Section 80CCG shall be withdrawn and the amount of deduction so claimed will be added in the year in which the amount is withdrawn before the date of such lock in period.

Que: What is the tax implication of RGESS after maturity? Prisha,  Lucknow

On Maturity / Sale of RGESS securities, the amount of long term capital gain on RGES is completely Income tax free.

6 Responses to Rajiv Gandhi Equity Saving Scheme 50% saving by Investing- Rs 50000

  1. N Mahapatra says:

    Sir, I want to know whether Rajiv Gandhi Equity Savings Scheme (RGESS) has already been launched and can we take the benefit in this Financial Year i.e. 2012-2013. If yes, please let me know the details of the scheme.

    Regards,
    N. Mahapatra

    • Income Tax Buddy says:

      Dear Mahapatra,

      RGES has already been launched and you can take benefit for year 2012-2013. Please note that you will be able to take benefit under this scheme, if you have not invested earlier in stock market.

  2. sughosh says:

    Hi,

    I have invested INR 50,000 in Mar 2013. Can I claim the tax benefit in the FY 13-14, If I once again invest INR 50,000 in Feb 2014 ?

    Regards

    Sughosh

  3. Agam Rewatkar says:

    If I invest in RGESS, for FY 2013-2014 Rs 50K, I will get tax benefit for Rs. 5000 according to 20% tax slab. If I will invest 50K again for FY 2014-2015, can I get tax benefit of Rs. 5000 again and so for FY 2015-2016. Means can I get overall tax benefit of Rs 15000 for the three consecutive years..?

  4. Shreekantrao Bhogam says:

    Hello sir,
    My Name is Shreekantrao. I am staying in Shaktinagar, Dt: Raichur (From 20km from Raichur) Karnataka State. Last year I took benefit of RGESS. This is I am planing to save in RGESS. Agents are not available. Is it possible to do online or any other possibility is there. Please give suggestion.

  5. sandesh says:

    I’ve opened Demat account in dec 2013 & Invested in exide equity shares in Feb 2014. Can i procure RGESS in FY 2014-15 & take tax benifit?

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