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)

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