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The deduction stands withdrawn from FY 17-18

Important Features of Rajiv Gandhi Equity when started / amended till FY 16-17 before the The deduction stands withdrawn from FY 17-18 is as under:-

Rajiv Gandhi Equity Savings Scheme Savings Scheme (RGESS) or RGESS :- tax savings scheme was introduced by the Ministry of Finance for first time investors in India, with the stated objective of "encouraging the savings of the small investors in the domestic capital markets stands withdrawn from FY 17-18

The scheme enables the investor to earn the returns of equity market and be eligible for tax benefits on the investments made under this Scheme.

Eligibility to participate?

The tax deduction under the Scheme shall be available to a new retail investor who:-
  1. is a resident of India
  2. has not traded in equity market or derivatives market
  3. all individual tax payers with income under 12 lakhs who are first time investors
  4. complies with all the other conditions of the Scheme

Benefits of the scheme

  1. The maximum Investment permissible under the Scheme is Rs. 50,000 and the investor would get a 50% deduction of the amount invested from the taxable income for that year.
  2. It provides additional tax benefits over and above the present tax savings schemes under the Income Tax Act.
  3. Gains, arising of investments in RGESS, can be realized after a year. This is in contrast to all other tax saving instruments.
  4. Investments are allowed to be made in installments in the year in which the tax claims are filed.
  5. Dividend payments are tax free.
  6. This scheme has a long run benefit of educating the retail investment segment and thereby moving towards financial inclusivity in the country.

How do invest through RGESS?

Investments into the RGESS are made through the DEMAT account. Eligible securities bought through the DEMAT account will automatically be subject to a lock-in during the first year. The investor will not be permitted to sell, pledge or hypothecate any eligible security during the fixed lock-in period. Trading of these securities is allowed after the completion of the fixed lock in period, subject to certain conditions

What is the maximum & minimum eligible investment?

The investor is free to invest as much as he wants through his RGESS designated Demat account. However, for tax exemption purpose, only the investment made in the first year of his investment, subject to a maximum amount of Rs 50,000 is eligible. Further, there is no minimum eligible investment is required.

The return on the investment

The return on the investments will be subject to market conditions. Historically, equity returns have been higher vis-a-vis Fixed Deposits on a long term basis.

The risks involved in RGESS investment

Any investment made in capital market is subject to market risk.

Can one lose the tax benefits!

The investor may lose the tax benefits in the following cases:-

The multiple times of investment under the scheme!

The investor can invest as many times as he wants in his first year of investment. Investment made in subsequent years will not be eligible for tax exemption.

Lock-in period of amount invested under RGESS

The total lock-in period for investments under the Scheme would be three years including an initial blanket lock-in period of one year, commencing from the date of last purchase of securities under RGESS.

Eligible securities under RGESS

Investors can pick the below listed stocks from following categories

  1. Equity Shares in BSE-100 or CNX 100
  2. Equity Shares of Maharatna, Navratna, Miniratna
  3. Units of eligible ETFs or MFs
  4. Eligible FPOs & NFOs
  5. IPOs of eligible PSUs

Comparison at a glance of RGESS with ELSS & PPF as tax saving / investment option Contents Highlights