Union Government has announced the Rajiv Gandhi Equity Savings Scheme (RGESS) in 2012-13 and further expanded in 2013-14. It is a tax saving scheme. It is designed exclusively for new investors with little or no experience in the securities market. Under Section 80CCG of the Income Tax Act, you as an investor qualify for a 50 percent deduction of the amount that is invested during the year. With up to a maximum of INR 50,000 investment per financial year from their taxable income, for three continuous years.
Rajiv Gandhi Equity Savings Scheme: Benefits
RGESS was introduced to encourage savings from small retail investors. The scheme also aims at improving the retail participation in equity markets. And also aims to promote an ‘equity culture’ in India. It’s one of the best investments in tax saving in India.
Eligibility Criteria of Rajiv Gandhi Equity Savings Scheme
The tax deduction under this scheme is for new retail investors scheme who fulfill the following criteria:
- Retail investors who are Residents of India
- The investor has no history of trading in the derivatives market and equity market
- Must have a gross total income of less than or equal to INR 10 lakh for the financial year
- You can only invest in companies that belong to BSE-100 or CNX-100
- You can only invest in Mutual Fund or Exchange Traded Fund Schemes.
- There is no minimum eligible investment amount.
Investment in Rajiv Gandhi Equity Scheme
Investors can make investments in Rahul Gandhi Equity Saving Yojana through their DEMAT account. The eligible securities that are bought through a DEMAT account are locked-in during the first year. The investor is not allowed to sell security during this lock-in period. After the fixed lock-in period is complete, the investor can trade these securities, but under certain conditions.
You are allowed to invest as many times as you like in the first year. The investments you make in the first years do not qualify for tax exemptions.
Tax Implications Of RGESS
- You can get tax benefits on a maximum of INR 50,000 eligible investment, which is eligible only for the first year
- Deduction of Tax will happen for 50 percent of the invested amount and a maximum of INR 25,000.
- You may lose your tax benefits if you withdraw the investment
- You may also lose this benefit if you fail to comply with or fail to fulfill any of the provisions of the scheme
The scheme is also a subject to market risk like other investments.
As mentioned, this investment scheme is subject to market risk. You need to understand what exactly those risks are and to what extent it can impact you. Seek sound financial advice before investing. For more details on investments in the capital markets, visit the official page by clicking HERE.