{"id":1520,"date":"2012-12-11T09:42:41","date_gmt":"2012-12-11T04:12:41","guid":{"rendered":"http:\/\/raagvamdatt.com\/?p=1520"},"modified":"2012-12-11T09:42:41","modified_gmt":"2012-12-11T04:12:41","slug":"rajiv-gandhi-equity-savings-scheme-save-tax-using-rgess","status":"publish","type":"post","link":"http:\/\/www.raagvamdatt.com\/rajiv-gandhi-equity-savings-scheme-save-tax-using-rgess\/","title":{"rendered":"Rajiv Gandhi Equity Savings Scheme &#8211; Save Tax Using RGESS"},"content":{"rendered":"<p>Rajiv Gandhi Equity Savings Scheme, or RGESS, was announced in the budget for the year 2012-2013.<\/p>\n<p>It is a new tax benefit introduced to encourage small and new investors to participation in the stock markets.<\/p>\n<p>Although it was announced in the budget, more clarity was needed regarding the scheme. Now, the Central Board of Direct Taxes (CBDT) and the Securities and Exchange Board of India (SEBI) have come out with the detailed guidelines regarding RGESS.<\/p>\n<p>&nbsp;<\/p>\n<h2>Income Tax Benefit Available Under Rajiv Gandhi Equity Savings Scheme (RGESS)<\/h2>\n<p>Income tax benefit for an investment of up to Rs. 50,000 in eligible securities would be available under RGESS. This invested amount would be deductible from your income of that year.<\/p>\n<p>So if you fall in the 20% tax bracket, you can save up to Rs 10,000 in income tax!<\/p>\n<p>(Please read <a title=\"Income Tax (IT) Slabs \/ Brackets and rates\" href=\"http:\/\/raagvamdatt.com\/latest-income-tax-it-slabs-brackets-and-rates\">&#8220;Income Tax (IT) Slabs \/ Brackets and rates<\/a>&#8221; for the latest income tax brackets and rates).<\/p>\n<p>And what are these eligible securities? These include some of the top traded shares, and more. Here&#8217;s the list:<\/p>\n<ul>\n<li>Shares falling in the BSE 100 or CNX 100 lists<\/li>\n<li>Shares of public sector units (PSUs) categorized as Maharatna, Navaratna or Miniratna by the Central Government<\/li>\n<li>Follow-on public offer from companies falling under the above two categories<\/li>\n<li>Exchange traded funds (ETFs)<\/li>\n<li>Mutual Funds (MFs) with an investment in RGESS-eligible stocks<\/li>\n<li><a title=\"When \u201cat-par\u201d is not so good: New Fund Offer (NFO) versus existing MF schemes\" href=\"http:\/\/raagvamdatt.com\/when-at-par-is-not-so-good-new-fund-offer-nfo-versus-existing-mf-schemes\">New Fund Offer (NFO)<\/a> of Mutual Funds<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2>Eligibility for Rajiv Gandhi Equity Savings Scheme (RGESS)<\/h2>\n<p>To be eligible for the income tax benefits of RGESS, your Gross Total Income (GTI) for the year should be less than or equal to Rs. 10,00,000.<\/p>\n<p>Also, this is a one-time deduction that is available to you if you are a &#8220;new retail investor&#8221;. No income tax deduction will be available to you for any subsequent assessment years under RGESS.<\/p>\n<p>And what does &#8220;new retail investor&#8221; mean?<\/p>\n<p>You have to fulfill all of the following conditions:<\/p>\n<ul>\n<li>You are a resident Indian<\/li>\n<li>You have not opened a demat account <em>before<\/em> RGESS was notified (November 2012) and you have not invested in equities or derivatives till RGESS was notified (November 2012)<\/li>\n<li>You have opened a demat account <em>before<\/em> RGESS was notified (November 2012) but you have not invested in equities or derivatives till RGESS was notified (November 2012)<\/li>\n<li>You have never claimed this deduction in any earlier year<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2>Rajiv Gandhi Equity Savings Scheme (RGESS) Lock-In Period<\/h2>\n<p>The total lock-in period of investment is RGESS is 3 years.Out of this, the first 1 year is a fixed lock-in, and the next 2 years have a flexible lock-in.<\/p>\n<p>This means that you when you invest in RGESS, you can not sell your investment within the first 1 year. After the first year, you can sell it, but you would have to invest the <strong>initial amount<\/strong> in RGESS eligible securities again.<\/p>\n<p>Initial amount is the amount you originally invested in RGESS and claimed as exempted.<\/p>\n<p>&nbsp;<\/p>\n<h4>Example<\/h4>\n<p>Let&#8217;s say you invest Rs. 30,000 in shares and claim as exempt under RGESS.<\/p>\n<p>Now, after 1.5 years, you sell these shares for a profit &#8211; you sell them for Rs. 35,000. You would need to invest Rs. 30,000 back into RGESS eligible securities.<\/p>\n<p>But if in the same example, you sell the shares for Rs. 25,000 after 1.5 years of the original investment, you would <em>still<\/em> need to reinvest Rs. 30,000 in RGESS eligible securities &#8211; which is an <em>additional<\/em> Rs. 5,000!<\/p>\n<p>&nbsp;<\/p>\n<h2>Other Features of Rajiv Gandhi Equity Savings Scheme (RGESS)<\/h2>\n<ul>\n<li>The investment would need to be done using RGESS designated demat accounts.<\/li>\n<li>The depository that has your RGESS demat account can ask the stock exchanges for your transaction details in order to enforce the lock-in period.<\/li>\n<li>Various stock exchanges would need to provide a list of RGESS eligible stocks, Exchange Traded Funds (ETFs) and Mutual Fund (MF) schemes on their websites.<\/li>\n<li>RGESS would be governed by section 80CCG of the Income Tax Act.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2>Should You Invest in Rajiv Gandhi Equity Savings Scheme (RGESS)?<\/h2>\n<p>In my opinion, the Rajiv Gandhi Equity Savings Scheme (RGESS) offers very little income tax benefit (a maximum of Rs. 10,000) in exchange for a lot of hassle.<\/p>\n<p>Furthermore, the fixed-and-flexible lock-in periods add further complication.<\/p>\n<p>So, in my opinion, RGESS is best avaided by an average investor like you and me &#8211; it is just not worth the trouble!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Rajiv Gandhi Equity Savings Scheme, or RGESS, was announced in the budget for the year 2012-2013. It is a new tax benefit introduced to encourage small and new investors to participation in the stock markets. Although it was announced in the budget, more clarity was needed regarding the scheme. Now, the Central Board of Direct [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[9],"tags":[24,28,33,36],"_links":{"self":[{"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/posts\/1520"}],"collection":[{"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/comments?post=1520"}],"version-history":[{"count":0,"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/posts\/1520\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/media?parent=1520"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/categories?post=1520"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.raagvamdatt.com\/wp-json\/wp\/v2\/tags?post=1520"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}