Rajiv Gandhi Equity Saving Scheme

Budget of year 2012-13 proposed an equity investment scheme known as RGESS but at that time process of investment is complicated so most of the investors are far away to it and they choose not to avail benefit of this scheme. But budget of year 2013-14 tries to make it more lucrative by increasing the upper limit of investor now Rs 12 Lac last year it was for the investor having maximum income of Rs. 10 lac. And also by increasing the investment span for 3 years. Now a new investor can invest for the first three years in this scheme.

Objective

Objective of introduction of this scheme is to increase participation of small investors and bring stability in stock market.

What is RGESS

This scheme is introduced for the first time or new investor in equity/shares. Under this scheme an investor can only invest in some specified companies shares like PSU’s or some specified mutual funds and ETF (exchange traded funds) and claim tax benefit up to a certain amount.

Who can invest

Those investors who does not have any demat account means or who never transacted/ used demat for sale/ purchase of shares they can invest in this scheme. The upper income limit has been increased by 10 lac to 12 lac.

Where can invest

As per SEBI guidelines, in  shares those company which falls under BSE 100 or CNX 100, in RGESS mutual funds, ETF’s and also for certain companies under IPO’s(Initial public offerings)

Lock in Period   

This scheme has a lock in period of 3 years. First year is fixed lock in in this period you can not sell of your investments but from the 2^nd year onwards it goes flexible means you can sell your investments but for the next two years you have to manage the minimum amount of investment in your RGESS account.

Minimum Amount- this should be equal of availed tax benefits or value of portfolio before selling of which ever is less. If you do not manage such minimum amount you can face consequences.

Consequences

Beware if you did not manage the minimum amount in your RGESS account the tax benefits earlier provided you will be taken back and you have pay taxes on the exemption amount at the prevailing rate.

Tax Benefits

A new section 80CCG has been introduced to give effect to this scheme. Under this section investor can claim deduction 50 % of amount invested and the maximum amount investor can invest is up to Rs. 50,000 it means he can claim benefit of Rs. 25, 000 under 80CCG

Although those who don’t want to avail tax benefits under this section for them there is no limit on invested amount. They can invest as much as they want and also claim tax benefits under sec 80C.