Rajiv Gandhi Equity Savings Scheme or RGESS is a new equity tax advantage savings scheme for equity investors in India, with the stated objective of "encouraging the savings of the small investors in the domestic capital markets.". It was approved by The Union Finance Minister, Shri. P. Chidambaram on September 21, 2012. It is exclusively for the first time retail investors in securities market. This Scheme would give tax benefits to new investors who invest up to Rs. 50,000 and whose annual income is below Rs. 12 lakh. In 2013-14, the income ceiling of the beneficiaries was raised to Rs. 12 lakh from Rs. 10 lakh specified in 2012-13.
The Scheme not only encourages the flow of savings and improves the depth of domestic capital markets, but also aims to promote an 'equity culture' in India. This is also expected to widen the retail investor base in the Indian securities markets.
The investor would get 50% deduction of the amount invested during the year, upto a maximum investment of Rs.50,000 per financial year, from his/her taxable income for that year, for three consecutive assessment years.
The Scheme not only encourages the flow of savings and improves the depth of domestic capital markets, but also aims to promote an 'equity culture' in India. This is also expected to widen the retail investor base in the Indian securities markets.
The investor would get 50% deduction of the amount invested during the year, upto a maximum investment of Rs.50,000 per financial year, from his/her taxable income for that year, for three consecutive assessment years.
- It provides additional tax benefits over and above the present tax savings schemes under the Income Tax Act.
- Gains, arising of investments in RGESS, can be realized after a year. This is in contrast to all other tax saving instruments.
- Investments are allowed to be made in installments in the year in which the tax claims are filed.
- The benefits can be availed for three consecutive years.
- Dividend payments are tax free.
- This scheme has a long run benefit of educating the retail investment segment and thereby moving towards financial inclusivity in the country.
- Success of this scheme can lead to transfer of assets from traditional savings instruments such as bank deposits and FDs to the capital markets, leading to diversification in retail investor portfolio and also leading to more productive "capital formation" assets.
ELIGIBLE SECURITIES UNDER RAJIV GANDHI EQUITY SAVINGS SCHEME
A. Equity shares, which are part of BSE 100 and CNX 100 indices, on the day of purchase
B. Equity shares of public sector enterprises which are categorised as Maharatna, Navratna or Miniratna
C. Units of exchange-traded funds (ETFs) or Mutual Fund (MF) schemes with RGESS-eligible securities as underlying
D. Follow on public offer of point A and B above
E. New fund offers (NFOs) of point C above
F. Initial public offer of a public sector company in which the government holds at least 51 per cent stake and whose annual turnover is not less than Rs 4,000 crore in the preceding three years
A. Equity shares, which are part of BSE 100 and CNX 100 indices, on the day of purchase
B. Equity shares of public sector enterprises which are categorised as Maharatna, Navratna or Miniratna
C. Units of exchange-traded funds (ETFs) or Mutual Fund (MF) schemes with RGESS-eligible securities as underlying
D. Follow on public offer of point A and B above
E. New fund offers (NFOs) of point C above
F. Initial public offer of a public sector company in which the government holds at least 51 per cent stake and whose annual turnover is not less than Rs 4,000 crore in the preceding three years
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