Investing in Rajiv Gandhi Equity Savings Scheme

The Rajiv Gandhi Equity Savings Scheme is a tax-saving option available to first-time equity investors. Under Section 80CCG of the Income Tax Act, an investor can get an exemption of up to 50% of the amount invested in eligible securities under this scheme. Any individual who has an income of not more than Rs. 10 lakh (Rs. 12 lakh, effective 1^st April 2014) and has never traded in equity or derivatives, can invest and avail of exemption under the RGESS. 

Demat Account: 

A demat account is needed for investing under the RGESS. If the investor already has one, he will have to designate it for availing of the benefit under the scheme. Form A, prescribed under the RGESS 2012 notification, and a copy of the PAN card also have to be provided to the depository participant for designating the demat account for RGESS.

Tax Benefit:

An investment of up to Rs. 50,000 can be made in RGESS in a financial year. One can exceed this limit, but the tax benefits can be claimed only for an investment of up to Rs. 50,000.

Holding Period:

The mandatory holding period is one year from the date of investment. There is a flexible term of two years immediately after the end of this period.

  

Eligible Securities: 

One can invest only in scrips of the BSE-100, CNX 100, shares and IPOs of Maharatna, Navratna or Miniratna PSU companies, NFOs and ongoing offers of mutual funds, ETFs or schemes listed on the stock exchanges, which are declared RGESS-compliant by mutual funds.

Points to Note: 

1.    If an investor does not comply with the RGESS guidelines, the deduction shall be reversed, and will be considered the income of the assessee and liable to taxation. 

2.    The costs like brokerage and STT shall not be included while considering investments of up to Rs. 50,000.