This entry is part 2 of 3 in the series RGESS 80CCG

This year 2012-13 Govt. canceled Tax Saving Infrastructure Bonds, tax benefit under section 80CCF and launched new scheme for investor its’ call “RGESS – Rajiv Gandhi Equity Saving Scheme, new section 80CCG.

Key Feature of RGESS Scheme

  • Maximum Limit Rs.50000 tax deduction 50%
  • Lock in 3 years
  • Purchase only BSE 100 shares
  • First time Investor for D’mat a/c

 

 

 

New tax saving scheme called “Rajiv Gandhi Equity Saving Scheme“(RGESS),exclusively for the first time retail investors in Securities Market. This RGESS Scheme would give tax benefits to new investors who invest up to Rs. 50,000 and whose annual income is below Rs. 10 lakh.

  • Scheme is open to new retail investors, identified on the basis of their PAN numbers. This includes those who have opened the Demat Account but have not made any transaction in equity and /or in derivatives till the date of notification of this Scheme and all those account holders other than the first account holder who wish to open a fresh account.
  •  Those investors whose annual taxable income is = Rs. 10 lakhs are eligible under the Scheme.
  • The maximum Investment permissible under the Scheme is Rs. 50,000 and the investor would get a 50% deduction of the amount invested from the taxable income for that year.
  • Under the Scheme, those stocks listed under the BSE 100 or CNX 100, or those of public sector undertakings which are Navratnas, Maharatnas and Miniratnas would be eligible. Follow-on Public Offers (FPOs) of the above companies would also be eligible under the Scheme. IPOs of PSUs, which are getting listed in the relevant financial year and whose annual turnover is not less than Rs. 4000 Crore for each of the immediate past three years, would also be eligible.
  •  In addition, considering the requests from various stakeholders, Exchange Traded Funds (ETFs) and Mutual Funds (MFs) that have RGESS eligible securities as their underlying and are listed and traded in the stock exchanges and settled through a depository mechanism have also been brought under RGESS.
  • The total lock-in period for investments under the Scheme would be three years including an initial blanket lock-in period of one year, commencing from the date of last purchase of securities under RGESS.
  • After the first year, investors would be allowed to trade in the securities in furtherance of the goal of promoting an equity culture and as a provision to protect them from adverse market movements or stock specific risks as well as to give them avenues to realize profits.
  • Investors would, however, be required to maintain their level of investment during these two years at the amount for which they have claimed income tax benefit or at the value of the portfolio before initiating a sale transaction, whichever is less, for at least 270 days in a year. The calculation of 270 days includes those days pursuant to the day on which the market value of the residual shares /units has automatically touched the stipulated value after the date of debit.
  • The general principle under which trading is allowed is that whatever is the value of stocks / units sold by the investor from the RGESS portfolio, RGESS compliant securities of at least the same value are credited back into the account subsequently. However, the investor is allowed to take benefits of the appreciation of his RGESS portfolio, provided its value, as on the previous day of trading, remains above the investment for which they have claimed income tax benefit.
  •  In case the investor fails to meet the conditions stipulated, the tax benefit will be withdrawn.

 

If you invest Rs. 50,000 , you can claim tax deduction of Rs. 25,000. If you are in 20% Tax bracket higher side benefit Rs. 5000, in 10% tax bracket investor save only 2500.

RGESS- Mutual FundRGESS - EquityELSSPPF
EligibilityAnnual Income less than 10 lakhs & First time InvestorAnnual Income less than 10 lakhs & First time InvestorNoneNone
Lock-In-Period3 Year3 year3 year15 year
I. Tax Section80CCG80CCG80C80C
Max. Limit50,00050000100000100000
Min. Investment5000500500
Need D'matYesYesNoNo
Market LinkYesYesYesNo
Yearly A/c maintenance Charges***Yes - D'mat Charges A/c Opening & Yr. charges Approximate 1500 to 2000Yes - D'mat Charges A/c Opening & Yr. charges Approximate 1500 to 2000NoNo
KYCYesYesYesYes
Tax on Interest/DividendNoNoNoNo

Note : D’mat account opening charges & maintenance charges  depend on Brokers, Now D’mat Charges start from  Rs.100 , check terms and conditions.

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