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The RGESS that was launched in F.Y.2012-2013 and notified under section 80CCG has started its operations and there are few details related to tax benefits that an Individual will have to consider to grab the full benefit of this scheme. Here are some of them:

First Time Investor: The tax benefit under this scheme is meant for first time investors who have not invested through a demat account before.

There can be situation wherein the investor might have held a joint holding with some other investor then in such cases such an investment as a second holder would not be considered as an existing investment and so the investor has the chance to ensure that the additional tax benefit is available and that they are making use of this particular benefit.

Nature of deduction: The total taxable income of the individual would be taken into consideration and then the amount of the benefit would be reduced from this so that the net figure is the one on which the tax will be calculated and paid. The facility that has been added by the Union Budget 2013-14 is that the deduction can be taken over a period of three years so the investor can actually spread out their investments.

Tax Benefit: The tax benefit is available to an investment upto Rs 50,000 in total and the deduction that is available for the investor would be to the tune of 50 per cent of the eligible amount. This would mean that the maximum benefit in the form of deduction that would be available for the investor would be Rs 25,000 in total. This benefit is in addition to deduction available u/s Sec 80C.

The Income limit to get the benefit of this section is upto Rs 12 lakh which was Rs 10 lakh earlier so if the income exceeds this figure then even if the investor is a first time investor then the benefits would not be available. The scope of the investment options has also been widened through the addition of equity oriented mutual funds . The “equity oriented fund” shall have the meaning assigned to it in clause (38) of section 10 of the Income Tax Act,1961.

These changes will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years.

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  1. K K SARAOGI says:

    An individual who is having total income of Rs.5 Lacs after deduction of Rs.1 Lac u/s 80C may not be interested to block Rs.50,000/- in RGESS just to get tax benefit of Rs.2,500/-. If he makes fixed deposit of Rs.50,000/- in a bank with 9% interest, he would earn Rs.4,500/- and pay Rs.450/- as tax (net Rs.4,050/-) if he is in 10% tax bracket. The Govt. should have allowed 100% deduction of the amount invested in RGESS in order to make it attractive. Because of the reasons mentioned herein above, the scheme is not likely to attract good investments.

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January 2021