Home General Knowledge GENERAL KNOWLEDGE BOOSTER : RAJIV GANDHI EQUITY SAVINGS SCHEME
GENERAL KNOWLEDGE BOOSTER : RAJIV GANDHI EQUITY SAVINGS SCHEME
Saturday, 07 February 2015 06:17

 

 

GENERAL KNOWLEDGE BOOSTER

 

RAJIV GANDHI EQUITY SAVINGS SCHEME

Rajiv Gandhi Equity Savings Scheme (RGESS), is a tax saving scheme announced in the Union Budget 2012-13. The scheme is designed exclusively for the first time retail individual investors in securities market, whose gross total income for the year is less than or equal to Rs. 10 lakh. The investor would get under Section 80CCG of the Income Tax Act, a 50% deduction of the amount so invested, upto a maximum investment of Rs. 50,000, from his/her taxable income for that year.

The objective of the Scheme is to encourage the flow of savings and to improve the depth of domestic capital markets. This would help in promoting an ‘equity culture’ in India. The Scheme aims at widening the retail investor base in the Indian securities markets and also furthers the goal of financial stability and financial inclusion.

Salient features of the scheme:

a) 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 mentioned 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.

b) 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.

c) To benefit the small investors, the investments are allowed to be made in instalments in the year in which tax claims are made.

d) 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.

e) 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.

f) 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.

g) 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.

h) For the purpose of valuation of shares, the closing price as on the previous day of the date of trading will be considered so that new investors are certain about their debits and credits into the account. In case the investor fails to meet the conditions stipulated, the tax benefit will be withdrawn.

 

 

 

 

 


Last Updated on Saturday, 07 February 2015 06:20