HomeInvestmentSaving SchemesRajiv Gandhi Equity Saving Scheme (RGESS): Details, Eligibility, How to Invest

Rajiv Gandhi Equity Saving Scheme (RGESS): Details, Eligibility, How to Invest

Rajiv Gandhi Equity Saving (RGESS) was a mutual fund in conjunction with tax advantage that was offered by the Government of India to encourage flow of savings of small retail investors within the domestic capital market. it was proclaimed in the Union Budget of 2012-13 and extended in 2013-2014. However, the Union Budget of India of 2017 projected that RGESS be fully phased out by 2018 with effect from April 1, 2017 due to less variety of assessees.

Rajiv Gandhi Equity Saving Scheme

What is RGESS?

The Rajiv Gandhi Equity Savings Scheme (RGESS) is a tax saving scheme that was announced during the year 2012-13 by the Union Budget and further expanded in the year 2013-14. It is exclusively designed for the new investors who have a gross income below a certain amount per year and don’t have any experience or little in the securities market. When the scheme was been introduced in the year 2012-13, the income ceiling was placed at INR 10 lacs only but in the year 2013-14, it was further raised to INR 12 lacs. The investors qualify for a 50% deduction under the Section 80 CCG of the Income Tax Act, in the amount invested during the year of this scheme including the maximum investment of INR 50,000 from their taxable income per financial year and will continue for the three assessment year.

Eligibility Criteria to apply for RGESS

The investor must be eligible for the following criteria listed below to apply for the Rajiv Gandhi Equity Savings Scheme (RGESS).

  1.  A person must be a retailed investor and Residing in India.
  2. There is no history of trading in the equity or derivatives market of the investor.
  3. To follow up, compliance with the scheme is a must for the investor.
  4. The investor must have a gross total income equal to or less than the INR 10 lacs per financial year.
  5. The mode of investment can be done only in the companies belongs to the CNX-100 or BSE-100 or in their Follow-on Public Offers.
  6. The investor can only make its investment with 51% or more holdings of the government in their IPOs or PSUs.
  7. For the investors who invest in RGESS eligible securities and its New Fund Offers (NFO), the investment can be done only in Exchange Traded Fund Scheme or in Mutual Funds.
  8. The investor can make their investment only in PSUs designated as Miniratna, Navratna, or Maharatna and its Follow-on Public Offers.

Deduction, Benefits & Returns under RGESS

 The Rajiv Gandhi Equity Savings Scheme (RGESS) under the new Section 80 CCG in Income Tax Act, the new retailed investor can avail the 50% of tax benefits for the three consecutive financial years and the best part of this scheme is that there is no minimum amount for the investment but on the other hand, if anyone fails to comply in any of the eligibility or withdraws the money may lose the tax benefits as well. Despite this, for first-time investors, the Ministry of Finance safeguarded the interest by restricting the investments to choose the large-cap stocks only, and to take the benefits of the positive market movements and also provides the lock-in period with better flexibility.

Regarding this, In RGESS Scheme, the money invested as securities were equities under the shares of PSUs in CNX-100 or BSE-100 which is categorized by the government under Miniratna, Maharatna, or Navratna. Moreover, it mitigates certain risks in Mutual Funds, Initial Public Offerings (IPOs), and Exchange Traded Funds (ETFs).

Rajiv Gandhi Equity Savings Scheme (RGESS) Calculator

The RGESS calculator works on a tax planning calculator which derives from the amount to be paid as a tax after doing all the deductions which have been met to the gross salary of a person at the end of the financial year. However, the tax payable is different from place to place and also gender to gender. This tax planning calculator helps the investor to calculate the taxes he/she has to pay during the tenure period of the RGESS scheme.

How to Invest in Rajiv Gandhi Equity Savings Scheme?

An investor can invest in RGESS through their Demat account. The eligible securities of the RGESS that are bought by a Demat account have the facility to automatically lock-in period during the first year of the investment. Therefore, during this lock-in period, an investor is not allowed to sell or pledge or hypothecate any eligible security of the RGESS and only after the completion of this lock-in period an investor can trade these securities but only under certain circumstances.

What is the difference between ELSS and RGESS?

The differences between the ELSS and RGESS are listed below in the following points:

Rajiv Gandhi Equity Savings Scheme is a tax savings scheme designed for the first-time retailed investor in the security market with providing the tax benefits under Section 80 CCG of the Income Tax. Equity Linked Savings Scheme provides tax benefits under Section 80 C of the Income Tax with a lock-in period of three years.
Investments are directly made in listed equities. Investments are made in Mutual Funds.
Only 50% deduction is allowed in up to INR 25,000 100% deduction is allowed in up to INR 1,00,000
The lock-in period is of 3 years but after the 1-year investor is allowed to do trading in certain circumstances. The lock-in period is of 3 years.
This investment is done on equities therefore, the risks are may be higher. This investment is done in Mutual Funds therefore, it has low risks.
This scheme is a separate investment limited which comes under Section 80 CCG and over & above Section 80 C. This scheme of ELSS comes under the tax benefit provided by Section 80 C.

Frequently Asked Questions

Q1. What do you mean by Section 80CCG?
Ans. Under Section 80CCG, an individual can claim its deduction on his initial investments of up to INR 50,000, and only a 50% deduction is allowed from the total amount which should not exceed more than INR 50,000.

Q2. What are the key features of the RGESS scheme?
Ans. The key features of the RGESS scheme are as follows:

  • Under RGESS, the deduction is allowed of 50% of the total amount invested and the maximum investment an investor can make of INR 50,000.
  • The new retail investor can apply for this scheme.
  • The income must not exceed more than INR 12lac of the assessee in the year of claiming the deduction.
  • The lock-in period for this investment is of three years.
  • This deduction is available to the retailer investors only.

Q3. What are the objectives of RGESS?
Ans. The objectives of the RGESS are to make the small retailer investor achieve their goal of making deductions in taxes and to encourage their savings so that they can enter into the domestic capital market. It also aims to improve retail participation in the equity markets by promoting equity culture in India.

Q4. What are the eligible securities of RGESS?
Ans. The eligible securities under this scheme for investment are equities listed in CNX-100 or BSE-100, selecting Mutual Funds, ETFs or IPOs of the Public sectors undertaking, shares of the Public Sector Companies listed by the Government as Miniratna, Navratna, or Maharatna, and other certain criteria are also eligible to fulfilling the securities of the RGESS.

Q5. Which bank provides the facility of RGESS?
Ans. The various banks provide the facility of RGESS such as ICICI Direct, Saraswati Co-operative Bank Ltd, South Indian Bank, and many more. This scheme is available in almost every bank in India.



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