Rajiv Gandhi Equity Saving Scheme is new tax saving device for Individuals whose eranings is below Rs 10, 00,000/-. RGESS is allowed only for first time investors in equity market.
RGESS allows 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.
This results in total tax saving of Rs 5150/-.
Key Highlights of RGESS is given below
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
Eligible Securities for Rajiv Gandhi Equity Savings Scheme –
- Equity Shares of Companies included in
- Eligible Securities
- CNX 100 & BSE 100
- PSU Maharatna, Navratna & Miniratna
- 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
3 years is lock in period of 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.
UTI RGESS Fund A 3 year close ended Index Fund tracking Nifty.
FAQ’s on RGES (Rajiv Gandhi Equity Scheme)
Que: Can NRI take Income tax benefit under RGES under Section 80CCG?
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 RGES.
Que: I have invested Rs 50000/- in Feb 2013. Can i take Benefit of RSection 80CCG in next year 2013-2014 also?
Income tax Deduction will not be allowed in next year, if you have already invested full Rs 50000/- in RGES 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?
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 RGES after maturity?
On Maturity / Sale of RGES securities, the amount of long term capital gain on RGES is completly Income tax free.
Que: Should I invest in RGESS ?
RGES is good for tax payer whose total Income is less then Rs 10 lac.
Please invest in RGES 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 RGES scheme.