Benefits of Rajiv Gandhi Equity Savings Scheme, 2012

Rajiv Gandhi Equity Savings Scheme, 2012 (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.” Vide notification dated November 23, 2012 the scheme has been notified by the Department of Revenue, Ministry of Finance (MOF). It is exclusively for the first time retail investors in securities market.

The objective of the scheme is to encourage flow of savings in the financial instruments and improve the depth of the domestic capital market

  • A new section 80CCG under the Income Tax Act, 1961 on ‘Deduction in respect of investment under an equity savings scheme’ has been introduced to give tax benefits to ‘New Retail Investors’ who invest up to Rs. 50,000 in ‘Eligible Securities’ and have gross total annual income less than or equal to Rs.10 Lakhs. The investor would get a 50% deduction of the amount invested from the taxable income for that year.
  • 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.
  • 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.
Eligibility Criteria for Rajiv Gandhi Equity Savings Scheme (RGESS)

The deduction under the Scheme will be available to a ‘new retail investor’ who complies with the conditions of the Scheme and whose gross total income for the financial year in which the investment is made under the Scheme is less than or equal to ten lakh rupees.

The deduction under the Scheme shall be available to a new retail investor who:-

  • Is a Individual Resident of India.
  • Who has not opened a demat account and has not made any transactions in the equity or derivative segment as on the date of notification of the scheme i.e., November 23, 2012. OR
  • Who has opened a demat account as a first holder, but has not transacted in the equity or derivate segment till November 23, 2012. OR
  • Who has a demat account as a joint holder.
  • Who has gross total income for the financial year less than or equal to Rs. 10 Lakh.

Process to claim Benefit under Rajiv Gandhi Equity Savings Scheme (RGESS)

A new retail investor can make investments under the Scheme in the following manner:

  • Open a demat account with a Depository Participant by providing an undertaking (Form A) that he wishes to designate his existing account or open a new account as RGESS account.
  • An investor can invest in eligible securities in one or more transactions during the year in which the deduction has to be claimed.
  • An investor can make any amount of investment in the demat account but the amount eligible for deduction, under the Scheme will not exceed fifty thousand rupees.
  • The eligible securities brought into the demat account, as declared or designated by the new retail investor, will automatically be subject to lock-in during its first year, unless the new retail investor specifies otherwise and for such specification, the new retail investor will submit a declaration in Form B indicating that such securities are not to be included within the above limit of investment.
  • An investor will be eligible for a deduction under subsection (1) of section 80CCG of the Act in respect of the actual amount invested in eligible securities, in the first financial year in respect of which a declaration in Form B has not been made, subject to the maximum investment limit of fifty thousand rupees.
  • An investor, who has claimed a deduction under sub- section (1) of section 80CCG of the Act, in any assessment year, will not be allowed any deduction under the Scheme for any subsequent assessment year.
  • An investor will be permitted a grace period of three trading days from the end of the financial year so that the eligible securities purchased on the last trading day of the financial year also get credited in the demat account and such securities will be deemed to have been purchased in the financial year itself.
  • An investor may also keep securities other than the eligible securities in the demat account through which benefits under the Scheme are availed.
  • An investor can make investments in securities other than the eligible securities covered under the Scheme and such investments will not be subject to the conditions of the Scheme nor will they be counted for availing the benefit under the Scheme.
  • The investment under the Scheme will consist of an investment in any of the eligible securities covered under the Scheme.
  • Deductions claimed will be withdrawn if the lock-in period requirements of the investment are not complied with or any other condition of the Scheme is violated.

Also Read the following :-

FAQ on Rajiv Gandhi Equity Savings Scheme (RGESS) -Section 80CCG

Sebi notifies Rajiv Gandhi Equity Savings Scheme norms

Rajiv Gandhi Equity Savings Scheme, 2012 -Section 80CCG –Income Tax Notification

More Under Income Tax


  1. Sudipto Choudhury says:

    Help needed.
    I hold 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 and have not yet received any notification on whether my a/c has been designated for RGESS or not.

    My Question: Shall I wait for notification or can I start investing in RGESS stocks etc.?

    Sudipto Choudhury

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