Investments Eligible For Deductions Under RGESS

In the Union Budget 2013, the Rajiv Gandhi Equity Savings Scheme was formally launched. Read on to know more about this scheme and which investments it applies to.

KEY POINTS:

• The Rajiv Gandhi Equity Savings Scheme applies only to new investors whose gross total annual income is less than or equal to Rs 10 lakh, for investments upto a limit of Rs 50000.
• For the purpose of the scheme, ‘new investors’ include individuals who have not opened a demat account before the notification of the scheme, those who had an account but had not made any equity or derivatives transactions in the account before the notification of the scheme or those who are not the first holders of an existing joint demat account.
• An assessee shall be entitled to get 50 per cent of the amount so invested in the previous year as deduction while computing his/her total income of the assessment year relevant to the previous year on account of investments made in specific eligible securities under sub-section (1) of Section 80CCG of the Income Tax Act, 1961.

Q) What is the Rajiv Gandhi Equity Savings Scheme (RGESS) all about? I deal only in mutual funds. Can I benefit from this scheme?

- Hiren Maity

The announcement made in the Union Budget 2012-13, that is to say, the Finance Act 2012, introduced a new section entitled ‘Deduction in respect of investments made under an equity savings scheme’ to give tax benefits to new investors whose gross total annual income is less than or equal to Rs 10 lakh, for investments upto a limit of Rs 50000.

In accordance with the Rajiv Gandhi Equity Savings Scheme, which was notified vide notification 51/2012 dated November 23, 2012, an assessee shall be entitled to get 50 per cent of the amount so invested in the previous year as deduction while computing his/her total income of the assessment year relevant to the previous year on account of investments made in eligible securities under sub-section (1) of Section 80CCG of the Income Tax Act, 1961.

For the purpose, ‘eligible securities’ means any of the following:

(a) Equity shares, on the day of purchase, falling in the list of equity declared as ‘BSE-100’ or ‘CNX-100’ by the Bombay Stock Exchange and the National Stock Exchange, as the case may be;

(b) Equity shares of public sector enterprises which are categorised as Maharatna, Navratna or Miniratna by the Central Government;

(c) Units of Exchange Traded Funds (ETFs) or Mutual Fund (MF) schemes with Rajiv Gandhi Equity Savings Scheme (RGESS) eligible securities as underlying, as mentioned in sub-clause (a) or sub-clause (b) above, provided they are listed and traded on a stock exchange and settled through a depository mechanism;

(d) Follow-on Public Offers (FPOs) of sub-clauses (a) and (b) above;

(e) New Fund Offers (NFOs) of sub-clause (c) above;

(f) Initial Public Offers (IPOs) of public sector undertakings wherein the government shareholding is at least fifty-one per cent, which is scheduled for getting listed in the relevant previous year and whose annual turnover is not less than Rs 4000 crore during each of the preceding three years;

Further, for the purpose, the ‘new retail investor’ shall include the following resident individuals:

(a) Any individual who has not opened a demat account and has not made any transactions in the derivatives segment as on the date of notification of the scheme;

(b) Any individual who has opened a demat account before the notification of the scheme but has not made any transactions in the equity segment or the derivatives segment till the date of notification of the scheme; and

(c) Any individual who is not the first account holder of an existing joint demat account shall be deemed to have not opened a demat account for the purposes of this scheme.