Rajiv Gandhi Equity Savings Scheme

Salient Features

Rajiv Gandhi Equity Savings Scheme (RGESS) is a scheme announced in the Union Budget (2012-13) by the Finance Minister to encourage flow of savings in domestic capital markets.

Under this scheme, ‘New Retail Investors’ can claim 50% of the amount invested, as a tax deduction, subject to a maximum investment amount of upto Rs. 50,000/-.

Quick Facts

Who Can Invest

New Retail Investors, whose gross total income (for the financial year in which the investment is to be made under the Scheme) is less than or equal to Rs. 12 lakhs.

Click on ‘Who is Eligible’ tab to know who are New Retail Investors.

Investment Amount

The maximum amount one can invest, for availing tax benefit, under the scheme is Rs. 50,000/-.

Tax Benefit

A one-time deduction u/s 80 CCG of Income tax Act, 1961, is available on 50% of the amount invested (subject to a maximum investment limit of Rs. 50,000/-). The benefit is in addition to the deduction available u/s Sec 80C of the Income tax Act, 1961.

Lock-in Period

3 years. There is a fixed lock-in during the first year followed by a flexible lock-in for subsequent two years. In the flexible lock-in period, investors will be permitted to trade, subject to conditions.

Click on ‘FAQs’ to read about the conditions of the Lock-in-period.

Tax Free Dividends

As per the current tax laws, dividend on eligible securities is tax free in the hands of investors.

Eligible Securities

Equity shares of companies which are included in “BSE-100” or “CNX-100” by the Bombay Stock Exchange and the National Stock Exchange, as the case may be;
Equity shares of public sector enterprises which are categorized as Maharatna, Navratna or Miniratna by the Central Government;
Units of Exchange Traded Funds (ETFs) or Mutual Fund (MF) schemes with Rajiv Gandhi Equity Savings Scheme (RGESS) eligible securities as underlying; provided they are listed and traded on the stock exchange and settled through depository mechanism;
Follow-on public offer of BSE-100 or CNX-100 and certain public sector enterprises, besides new fund offers of mutual funds, as mentioned in (c) above.

Who is Eligible

The deduction under the Scheme will be available to New Retail Investors whose gross total income (for the financial year in which the investment is to be made under the Scheme) is less than or equal to Rs. 12 lakhs.

A ‘New Retail Investor’ refers to the following resident individuals:-

Any individual who has not opened a demat account and has not made any transactions in the equity or derivative segment as on the date of notification of the scheme i.e., November 23, 2012; or
Any individual who has opened a demat account as a first account holder, but has not made any transactions in the equity or derivative segment till the notification of the Scheme i.e. November 23, 2012; or
Any individual who is not the first account holder of an existing joint demat account.

Why Invest

To enjoy an additional tax saving benefit on your hard earned money. The tax benefit under RGESS u/s 80 CCG of the Income tax Act, 1961, is over and above the present tax saving limit (Rs. 1,00,000/-) u/s 80C of the Income tax Act.
This scheme has a lock-in period of only 3 years. Most of the other tax saving products (NSC, PPF, Bank FDs etc.) has a higher lock-in period.
Gains, arising out of investments in RGESS, can be realized after the completion of fixed lock-in period.
Historically, equity markets in India have generated better returns than other asset classes. Staying invested in equities, as an asset class, from a long term perspective allows you to enjoy its potential upside.
Those individuals who do not have any knowledge of stock market or selecting a stock have an option to invest in equity based mutual fund schemes.

Click on ‘Eligible Schemes’ tab to know which of the equity schemes of Invesco Mutual Fund are eligible under RGESS.

Eligible Schemes

Invesco India Nifty ETF – An Open Ended Exchange Traded Fund.

To know more about the eligible scheme(s), click here.

How To Invest

A New Retail Investor has to take note of the following procedure to buy units of eligible Invesco Mutual Fund schemes under the Rajiv Gandhi Equity Savings Scheme, 2012:-

In case, you do not have a demat account, then you will need to open a demat account and a broking account with your preferred Depository Participant and Stock Broker respectively.
If you already have a demat account (where you are the first holder), then you may designate your existing demat account for the purpose of availing tax benefit under the Scheme;
Submit a declaration in ‘Form A’ to the Depository Participant for verifying your status as a New Retail Investor;
Furnish your Permanent Account Number (PAN) while opening the demat account;
Once the above steps are complied with, you can call your Stock Broker and give instructions to buy units of eligible Invesco Mutual Fund schemes.

Click on ‘Eligible Schemes’ tab to know which of the equity schemes of Invesco Mutual Fund are eligible under RGESS.

Queries/Help

We will assist you and take you through all the steps mentioned above, to ensure that you are ready to participate in the Rajiv Gandhi Equity Savings Scheme, 2012.

You need to simply fill in your contact details in the Form given on the right hand side of this page & our Relationship Manager will assist you in making this process hassle free.

Quick Links

FAQs

SEBI Circular

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DISCLAIMER: This write-up is based on ‘Rajiv Gandhi Equity Savings Scheme, 2012’ (‘the Scheme’) notified by Government of India vide its notification dated November 23, 2012 and sets out the provisions of the Scheme in a summary manner only and not a complete analysis or listing of all the provisions of the Scheme. The taxation laws are subject to relevant conditions. In view of the individual nature of tax consequences, investor is advised to consult his / her own professional advisor to determine possible legal, tax, financial or other considerations of subscribing to or redeeming units, before making a decision to invest / redeem / hold investment. While utmost care has been exercised while preparing this write-up, IAM does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information.

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