The scheme enables the investor to earn the returns of equity market and be eligible for tax benefits on the investments made under this Scheme.
With launch of Rajiv Gandhi Equity Scheme (RGESS) many first time investors are showing keen interest in this scheme which has tax savings benefits. Here are few FAQs
What benefits does RGESS offer to small investors?
Under RGESS, a new section 80CCG has been introduced in the Income Tax Act, 1961 on ‘Deduction in respect of investment under an equity savings scheme' to offer tax benefits to ‘New Retail Investors' whose gross total income is less than or equal to Rs.12 Lakhs and who wish to invest up to Rs.50,000 in ‘Eligible Securities'.
Who is a ‘New Retail Investor'?
- ‘New Retail Investor' means any resident Individual who has:
- Opened no demat account and done no transaction in the derivative segment as on the date of notification of the scheme i.e., November 23, 2012 OR
- Opened a demat account [as a ‘Sole/First Holder'] but done no transaction in the equity or derivate segment till November 23, 2012 OR
- opened a joint demat account [not as a ‘First Holder'] and done no transaction in the derivative segment till November 23, 2012
Tax benefits for new retail investors investing in RGESS
What is the maximum amount that you may invest under RGESS for availing tax benefits?
You may invest any amount up to Rs.50,000 in eligible securities to be held in your demat account designated for RGESS for availing tax benefits.
Can you invest more than Rs.50,000 and claim tax benefit under RGESS?
You may invest any amount in a demat account designated under RGESS but the benefit under the Scheme can be claimed only on investment up to Rs. 50,000.
What will be the basis for valuation of initial investment made under RGESS for availing tax benefit?
Valuation of investments (up to Rs.50,000) for availing tax benefits under RGESS will be based on the cost of acquisition of eligible securities excluding brokerage charges, Securities Transaction Tax, stamp duty, service tax and all taxes which are appearing in the contract note issued by the stock broker.
Is this deduction under RGESS over and above the limit of Rs.1,00,000 currently available under Section 80C of Income Tax Act ?
Yes. The deduction of Rs.25,000 (provided you invest Rs.50,000 under RGESS) offered under Section 80CCG for RGESS is in addition to the deduction of Rs.1,00,000 currently available under Section 80C of Income Tax Act.
What is the holding period for investments made under RGESS?
Investment holding period under RGESS is of three years which includes ‘Fixed Lock-in' of one year and ‘Flexible lock-in' of two years
How will the eligible securities be locked-in? Can I invest in eligible securities into the same account and not subject such investments for RGESS lock-in?
The eligible securities brought into the demat account will be automatically locked-in subject to investment limit of Rs.50,000/-
However, if you do not want certain securities credited to your demat account to be considered for the RGESS, then a declaration in the prescribed format (i.e. ‘Form B') should be submitted to the DP within a period of one month from the date of the transaction.
Click to know list of mutual funds offering the RGESS.