Nov 232012
 

Rajiv Gandhi Equity Saving Scheme (RGESS)


Eligibility:

The Rajiv Gandhi Equity Saving Scheme is applicable to those individual.

1. Whose Taxable Income is not more than Rs. 10,00,000/- in a Financial Year.
2.  Who have no Equity or Derivative transaction in the Demat Account linked to their PAN.

The objective of the scheme is to promote New Investor to invest into financial or stock market. The government is looking forward to getting good response from new investors willing to invest into equity market.  The scheme is a once in a life-time and are not eligible to reinvest into this scheme again.

Amount of Investment:

The Amount of Investments in this scheme can be maximum up to Rs. 50,000/- to avail tax benefits. For the benefit of the small investors, investments into the scheme can be made into installment for the financial year in which tax claims are made.

Calculation:

The individual will get 50% deduction of Amount invested under RGESS from the taxable income,  this way you can reduce your tax liability. For instance, if you invest Rs. 50, 000/- you would get Rs.25,000/- as deduction from total taxable income and if applicable tax rate is 20%, then an amount of Rs 5,000/- is saved from your taxes.

Period:

The lock in period is of three years. However, after the initial one year, the investor can trade in his securities if he is able to maintain a certain investment level which depends upon the value of shares at the time of the sale.

Before initiating a sale transaction, the investor must maintain the level of investment during these two years, at the amount which they have claimed for the tax benefits or the value of shares, which ever is less, for atleast 270 days in a year.

Investment can be done in to one or more of the followings :

  • Stocks or Shares listed under BSE100 / CNX100.
  • PSUs which are categorized as Navratnas, Maharatnas, and Miniratnas companies
  • Public offers of these companies,
  • Initial Public Offers of PSUs whose turnover must be over Rs 4000 crores in each of the last three financial years.
  • Exchange Traded Funds (ETFs) and Mutual Funds incorporated into the scheme, and exchange traded funds.

Although the RGESS has been designed for new retail investors, the demat account holders can also avail benefits if they have not transacted in equity or derivatives up to the date of notification of the RGESS.

The PAN monitoring based mechanism is in operation under RGESS by the tax authorities. The usual valuation of securities from RGESS portfolio will be carried out by the depositories. If the investors are unable to fulfill the conditions stipulated, the tax benefits will be withdrawn.