1. What is Rajiv Gandhi Equity saving Scheme 2012 (RGESS)?
A tax-saving scheme launched by the Government of India with the objective to encourage the flow of savings and improve the depth of domestic capital market. Demat account is compulsory to avail tax benefit under RGESS.
2. The investments under RGESS are available under Section 80CCG of IT Act 1961
3. Individual income tax assesses are allowed deduction in the computation of total income of 50% of total amount invested in RGESS eligible securities subject to a maximum deduction of Rs.25, 000. The maximum investment eligible for the purpose of deduction under Section 80CCG is Rs. 50,000.
4. You are eligible for income tax deduction benefits under Section 80CCG provided –
i) You are a resident individual, new retail investor.
ii) Your gross total annual income does not exceed Rs.10 lakhs.
iii) You have invested in RGESS eligible or your investment is locked-in for the period of 3 years from the date of acquisition.
5. Who is a "New Retail Investor?"
"New retail investor" is a resident individual:-
• Who has not opened a demat account and has not made any transactions in the derivative segment as on the date of notification of the Scheme or who has opened a demat account before the date of notification of the Scheme but has not made any transactions in the equity or the derivative segment thereafter.
An individual who is not the first account holder of an existing joint demat account shall also be eligible to open an individual demat account for the purposes of this Scheme.
RGESS 2012 was notified by the Ministry of Finance, Government of India on the 23rd November 2012 (Notification S.O. 2777 (E))
6. Eligible securities as defined under RGESS are –
Equity shares of companies representing "BSE-100" Index or "CNX- 100" Index including their Follow on Public offers (FPO), Maharatna, Navratna or Miniratna public sector enterprises and their FPOs, Units of Exchange Traded Funds (ETFs) or Mutual Funds.
7. you can designate your existing demat account as RGESS designated demat account by submitting Form A to DP and PAN for designating existing demat account as RGESS eligible account.
Illustration:
| |
| | | | Amount (Rs.) | |
| |
| Amount Invested in RGESS | | 50,000 | | 75,000 | | 30,000 | |
| |
| Maximum Eligible investment in RGESS | | 50,000 | | 50,000 | | 30,000 | |
| |
| 50% deduction on RGESS Deduction | | 25,000 | | 25,000 | | 15,000 | |
| |
| | | | | | | | |
| |
| Tax Savings under RGESS | | | | | | | |
| |
| 10% Tax Bracket | | 2,500 | | 2,500 | | 1,500 | |
| |
| 20% Tax Bracket | | 5,000 | | 5,000 | | 3,000 | |
| |
Note- Deduction under 80CCG is available only where gross total annual income doesn't exceed Rs.10 lac. 
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