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Monday, February 11, 2013

What is Rajiv Gandhi Equity Savings Scheme (RGESS)

What is RGESS?
Rajiv Gandhi Equity Savings Scheme (RGESS) is a new equity tax advantage savings scheme for equity investors in India. The scheme got it's approval on September 21, 2012. It is exclusively for the first time retail investors in securities market.


Who can invest?
Any new retail investor can start investing in this scheme. An investor is defined as a new investor if he or she satisfies the following terms before investing in the scheme.
  • Demat Account Not Opened
  • No transactions in Equity or F&O
  • Resident Individual
  • Annual Income < =Rs. 10 lakh
  • If Demat Account already Opened, No transactions in Equity or F&O
  • 2nd & 3rd holder of an account can open a new account as 1st holder
How much can you invest?
There is no limit to the amount of money that you can invest but the maximum amount eligible for claiming benefit under RGESS is Rs. 50,000.

Exclusive Tax Rebate Features
(a) This Scheme provides for claiming deduction in the computation of total income of the assessment year relevant to a previous year on account of investment in eligible securities under subsection (1) of section 80CCG of the Income-tax Act,1961. 
(b) Deduction u/s 80 CCG, is available on 50% of the amount invested. 
(c) The benefit is in addition to deduction available u/s Sec 80C.
(d) Interest earned is also non taxable in the hands of the investor.

Lock In Period
The eligible securities brought into the demat account will be automatically locked-in from the date of investment till one year from the date of last purchase of RGESS eligible securities. This period is called ‘Fixed Lock-in’ during which you cannot pledge or sell these securities.
  • Holding Period = 3 Years
  • Fixed lock-in Period = 1 Year from the date of credit
  • Flexible lock-in Period = 2 Years from the end of Fixed lock in period
During subsequent two years called as Flexible Lock-in, you can sell and buy RGESS securities. However, you will have to maintain the value of RGESS investment for cumulative period of 270 days during each of these two years.

RGESS Vs ELSS Vs PPF

RGESSELSSPPF
EligibilityAnnual Income less than 10 lakh.NoneNone
Lock-in Period1+23 years15 Years
Tax Benefits50% (80 CCG)100% (80 C)100% (80 C)
Maximum Investment for DeductionRs.50,000Rs.100,000Rs.100,000
Minimum InvestmentNARs.500 to Rs.5000Rs.500
Need for DEMATYesNoNo
Equity LinkedYesYesNo
Annual ReturnMarket BasedMarket Based8.8%
Interest EarnedNon TaxableNon TaxableNon Taxable
RiskMedium to HighMedium to HighLow

RGESS tries to encourage a new investor to come into the world of equities but what remains to be seen is that whether a new investor who has never invested in equities would be ready to take the risk plunge for saving a maximum of 50% rebate on a max investment of Rs. 50,000.

Cheers

Manoj Arora

5 comments:

  1. I for all time emailed this website post page to all my
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    ReplyDelete
  2. Hi, sir i am an engg student .new to share market. Recently opened a demat account. Can i participate in this scheme. Whats the minimum. Please reply.
    -kartik

    ReplyDelete
    Replies
    1. Hi Kartik

      Thank you for your query.
      Good to know that you have started to invest in equity market while you are studying. You have an immense time advantage. So, congratulations for that !!
      Yes, you are eligible to participate in the scheme as long as you have not done any equity or derivative transaction till date. RGESS is designed only to attract fresh investors like you to equity market.
      There is no minimum investment limit for RGESS. You can start with as much amount as you wish to.

      Delete
  3. Hi,

    Basic information:

    I hold a Demat A/C with HDFC. I am eligible for RGESS. (indian, income < 10L pa, never-ever traded with my existing Demat A/C)

    Hence, I submitted Form A to HDFC on 5 Feb 2012. I have not received any update on whether my Demat a/c has been designated for RGESS or not.

    My Questions:

    A.
    1) Will I be notified through my bank/any other way that my Demat A/C has been designated for RGESS?

    2) If Yes, how long (in average) will it take to complete this "designation" process?

    B. 1) Can I start trading (in RGESS specific equities and funds etc. to avail related Tax exemption) now without knowing whether my demat a/c has been designated for RGESS?

    C. 1) (Since I have not traded ever) Can I trade myself (with all risks etc.) through internet etc. or do I need a broker or a 3rd party to do it for me? I have a trading a/c and I have HDFC trading mobile app too.

    Thanks for your help in advance.

    Sudipto Choudhury

    98311 92043

    ReplyDelete
  4. Hi,

    I hold a Demat A/C with HDFC. I am eligible for RGESS. (indian, income < 10L pa, never-ever traded with my existing Demat A/C)

    Hence, I submitted Form A to HDFC on 5 Feb 2012. I have not yet received any intimation on whether my demat a/c has been designated for RGESS.

    My Questions:

    A.
    1) Will I be notified through my bank/any other way that my Demat A/C has been designated for RGESS?

    2) If Yes, how long (in average) will it take to complete this "designation" process?

    B. 1) Can I start trading (in RGESS specific equities and funds etc. to avail related Tax exemption) now without knowing whether my demat a/c has been designated for RGESS?

    C. 1) (Since I have not traded ever) Can I trade myself (with all risks etc.) through internet etc. or do I need a broker or a 3rd party to do it for me? I have a trading a/c and I have HDFC trading mobile app too.

    Thanks for your help in advance.

    Sudipto Choudhury

    98311 92043

    ReplyDelete