Dr. Sanjiv Agarwal

Government of India has recently notified on 23rd November, 2011, Rajiv Gandhi Equity Savings Scheme (RGESS),  2012 for new retail investors (as announced in this year’s budget ) whereby investment made in RGESS shall allow investor for claiming deduction under new section 80 CCG of Income Tax Act in the computation of total income of the relevant assessment year on account of investment is eligible securities.

The primary objective of RGESS is to encourage savings of the small investors in domestic capital market by way of making new investment by assessees in any eligible securities which will include any one of the following, ie, equity shares falling under BSE 100 of Bombay Stock Exchange or CNX  100 of National Stock Exchange, shares of public sector enterprises, units of exchange trade funds or mutual funds where in RGESS eligibile securities are part of portfolio , new or follow-on offers of such securities and initial public offers of public sector companies wherein government’s holding in atleast fifty one percent . Thus, RGESS will not include securities of companies not covered in any of the above criteria ensuring that only securities of select companies are choosen   for investment to provide lesser risk to investors.

While such investments will have to be made in demat made only, the class of investors will be limited as the deduction will be allowed only to new investors. This will include any individual who has not opened a demat account and has not made any transactions in the derivative segment as on the date of notification of the scheme, 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 derivative segment till such notified date, and 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 RGESS scheme.

The deduction under the scheme shall 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 period of holding of eligible securities shall be three years to be counted in the manner detailed hereunder. All eligible securities are required to be held for a period called the fixed lock-in period which shall commence from the date of purchase of such securities in the relevant financial year and end one year from the date of purchase of the last set of eligible securities (in the same financial year) on which deduction is claimed under the scheme. The new retail investor shall open a new demat account or designate his existing demat account for the purpose of availing the benefit under the Scheme. The new retail investor shall submit a declaration in Form A to the depository participant who will forward the same to the depository for verifying the status of the new retail investor. He should  furnish Permanent Account Number (PAN) while opening the demat account or designating the existing account as a RGESS eligible account, as the case may be.

With this, tax assessees will now get a new tool to invest as well as  save on income tax for the current financial year.

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  1. Sunil Mehta says:

    Rajiv Gandhi Equity Savings Scheme (RGESS), 2012 for new retail investors (as announced in this year’s budget)

    What is the meaning of new retail investor those who are having de mate account prior to introduction of scheme will they eligible to get the deduction, Please reply thanks in advance.

    Sunil Mehta

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January 2021