Rajiv Gandhi Equity Savings Scheme (RGESS)
Rajiv Gandhi Equity Savings Scheme (RGESS) is aimed at encouraging small investors to channelize their savings into domestic capital markets.
The Rajiv Gandhi Equity Savings Scheme (RGESS), is a tax saving scheme announced in the Union Budget 2012-13 (para 35) and further expanded vide Union Budget 2013-14 (para 61 & 144). The scheme is designed exclusively for the first time individual investors in securities market, whose gross total income for the year is below a certain limit. In 2013-14, the income ceiling of the beneficiaries was raised to Rs. 12 lakh from Rs. 10 lakh specified in 2012-13. The investor would get under Section 80CCG of the Income Tax Act, a 50% deduction of the amount invested during the year, upto a maximum investment of Rs. 50,000 per financial year, from his/her taxable income for that year, for three consecutive assessment years.
The Scheme is open for all New Retail Investors who have gross total income less than or equal to Rs. 12 lakh. A new retail investor is one:
who is a resident individual (the benefit cannot be availed by HUF, corporate entities / trusts etc)
who has not opened a Demat account and has also not done any trading in the derivative segment till RGESS account opening date or the first day of the “initial year” in which he brings in the RGESS eligible investment into the account, whichever is later.
who has opened a Demat account and has not made any transactions in equity and /or in the derivative segment till designating such account as RGESS or the first day of the “initial year” in which he brings in the RGESS eligible investment into the account, whichever is later.
In case of joint accounts, only the first account holder will not be considered as a new retail investor. All those existing account holders other than the first demat account holder (eg. second / third account holders or other joint holders) or nominees of the existing account holders will be considered as new retail investors for the purpose of opening of a fresh RGESS account, if otherwise eligible.
In case the demat account is opened as a first holder, but there are no transactions in the equity or derivative segment, then the first account holder is eligible to be a new retail investor.
For taking the benefits under RGESS, the new retail investor will have to submit a declaration, as in Form ‘A’, to the Depository Participant (DP) at the time of account opening or designating his existing demat account.
Eligible securities, which are brought thereafter into such an account, will be automatically subject to lock-in upto a value of Rs. 50,000, unless the investor specifies otherwise through the Form ‘B’ specified in this regard.
Listed equity shares / units
The top 100 stocks at NSE and BSE i.e., Nifty 100 / BSE -100 (This does not mean that one has to trade through NSE or BSE only. If the securities constituting BSE 100 or Nifty 100 are listed and traded in any new stock exchange that may come up on a later day, the same will be eligible for RGESS.)
Equity shares of public sector enterprises which are categorized by the Government as Maharatna, Navaratna and Miniratna
Units of Exchange Traded Funds (ETFs) or Mutual Fund (MF) schemes with RGESS eligible securities as mentioned in (a) and / or (b) as underlying, provided they are listed and traded on a stock exchange and settled through a depository mechanism)
Follow-on Public Offers (FPOs) of (a) and (b)
New Fund Offers (NFOs) of (c) above
Unlisted equity shares
Initial Public Offers (IPOs) of PSUs, which are scheduled to get listed in the relevant financial year and where the government holding is at least 51% and whose annual turnover is not less than Rs. 4000 cr for each of the immediate past three years.
New retail investors with an annual income of less than 12 lakhs.
The maximum amount eligible for claiming benefit under RGESS is Rs. 50,000 per financial year for three consecutive years starting from the initial year.
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.
For complete FAQs on the scheme please refer to the Ministry of Finance site here.