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Save Tax: Rajiv Gandhi Equity Saving Scheme (RGESS)

Save Tax: Rajiv Gandhi Equity Saving Scheme (RGESS) – FY2012-13

Money Saved is money earned: Rajiv Gandhi Equity Saving Scheme (RGESS) U/s 80CCG can help an Individual to save Income tax. RGESS has been explained below:

Eligibility:

  • Individual’s investing in equity for first time and their Gross total income is not exceeding Rs. 10 lac.
  • He or she has not opened a demat account before 23rd Nov 2012.
  • Individuals will be considered first time investors even if account was opened before 23rd Nov 2012 and no transaction has been done in equity on derivative segment.

How to avail Tax Benefit:

  • Open a new RGESS designated demat account or designate existing demat account to RGESS provided no transaction has been done before 23rd Nov 2012. Individual has to submit a declaration in Form A to depository participant certifying that he has not traded before 23rd Nov 2012.
  • Invest in eligible Mutual Fund Schemes or Invest directly in specified stocks from listed shares of Navratna, Maharatna, Miniratna PSU, CNX 100 Index, BSE-100 Index and PSU IPO’s with turnover of Rs.4,000 Crore or more where Govt. shareholding is 51% or more.

Lock in Period:

  • Lock in Period is 3 years.
  • First year is fixed lock in period. Investors can’t sell the securities in first year.
  • In 2nd and 3rd years, investors can sell the securities, but has to buy other eligible securities from the proceeds.

Important Facts to Know :

  • RGESS accounts are automatically subject to lock in period.
  • Benefit of scheme 80CCG i.e., RGESS is available only for the first year.

Quick Questions:

  • How much do I save?: Only 50% of the amount invested is eligible for deduction. If Investment is Rs. 50,000 then the tax benefit for 10% and 20% tax slab is Rs.2,000 and Rs.5,000 respectively. RGESS is not applicable on individuals falling in 30% slab, because it can be availed if GTI is less than 10 lac.
  • Can I invest more?: Yes.
  • Is lock-in clause applicable to additional income?: No, provided declaration has been given in Form B to depository participant.

Hetuh Financial Recommendation: Considering complexity and quantum of saving, we recommend to invest in mutual funds. There are Mutual Funds that comply with the conditions laid down under this scheme.

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