Rajeev Gandhi Equity Saving Scheme U/sec. 80CCG

RAJEEV GANDHI EQUITY SAVING SCHEME

In the Union Budget 2012-2013, the government Finance Minister introduced a brand new scheme known as - Rajiv Gandhi Equity Saving scheme with twin edges of understanding and investment in hand-picked Equities and additionally enjoying tax advantages for selected  investors. scan this article to understand the key highlights of the scheme.

Effective from 1st April 2013, investors with a gross total income not more than Rs.12 lakh can invest in RGESS, up from earlier income limit of Rs.10 lacs. Investors can park funds in Mutual Funds and listed shares and extended tax benefits to three successive years.

Who can invest in RGESS?	New retail investors with an annual income of less than 10 lakhs.
How much can I invest?	The maximum amount eligible for claiming benefit under RGESS is Rs. 50,000.
Tax Benefit	Deduction u/s 80 CCG, is available on 50% of the amount invested. The benefit is in addition to deduction available u/s Sec 80C.
Lock-in Period	3 years. Fixed lock-in during first year followed by a flexible lock-in for subsequent two years.

Rajiv Gandhi Equity Savings Scheme (RGESS) is a new equity tax advantage savings scheme for equity investors in India. The scheme got it's approval on September 21st, 2012. It is solely for the first time retail investors in securities exchange  market.

The investors who invest up to Rs.50,000 in 'Eligible Securities' and have gross total annual income less than or equal to Rs.10 Lakhs will benefit from a new section 80CCG under the Income Tax Act, 1961 on 'Deduction in respect of investment under an equity savings scheme' has been introduced to give tax benefits.

Example:
Let us say, you invest Rs.50,000 under RGESS, the amount eligible for tax deduction from your income will be Rs.25,000. Alternatively, if you invest Rs.30,000 under RGESS, the amount eligible for tax deduction will be Rs.15000. So you may save about Rs.1545, Rs.3090 for income tax slabs 10% and 20% respectively under this scheme.

Eligibility

• Demat Account Not Opened
• No transactions in Equity or F&O
• Resident Individual
• Annual Income < =Rs. 10 lakh
• If Demat Account already Opened, No transactions in Equity or F&O. You can use the Form A for this purpose.
• 2nd & 3rd holder of an account can open a new account as 1st holder

Lock in Period

The eligible securities brought into the demat account will be automatically locked-in from the date of investment till one year from the date of last purchase of RGESS eligible securities. This period is called ‘Fixed Lock-in’ during which you cannot pledge or sell these securities.

• Holding Period = 3 Years
• Fixed lock-in Period = 1 Year from the date of credit
• Flexible lock-in Period = 2 Years from the end of Fixed lock in period

During subsequent two years called as Flexible Lock-in, you can sell and buy RGESS securities. However, you will have to maintain the value of RGESS investment for cumulative period of 270 days during each of these two years.

The total lock-in period for investments under the Scheme would be three years including an initial fixed lock-in period of one year, commencing from the date of last purchase of securities under RGESS. 

Illustration of Lock-In in RGESS

     II. RGESS lock in period if investments are brought in installments

 

Eligible Securities

• Companies belonging to BSE-100 or CNX-100 and their Follow On Public Offers
• PSUs designated as Maharatna, Navratna or Miniratna and their Follow On Public Offers
• Mutual Fund or Exchange Traded Fund Schemes investing in RGESS eligible securities and their New Fund Offers
• Initial Public Offers of PSU with 51% or more government holding