Rajiv Gandhi Equity Savings Scheme

  • What is RGESS?

    Rajiv Gandhi Equity Savings Scheme (RGESS), is a tax saving scheme announced in the Union Budget 2012-13 (para 35) and further expanded vide Union Budget 2013-14 (para 61 & 144). The scheme is designed exclusively for the first time individual investors in securities market, whose gross total income for the year is below a certain limit. In 2013-14, the income ceiling of the beneficiaries was raised to Rs. 12 lakh from Rs. 10 lakh specified in 2012-13. The investor would get under Section 80CCG of the Income Tax Act, a 50% deduction of the amount invested during the year, upto a maximum investment of Rs. 50,000 per financial year, from his/her taxable income for that year, for three consecutive assessment years.

  • What is the objective of the Scheme?

    As announced in the Union Budget 2012-13, the objective of the Scheme is to encourage the flow of savings and to improve the depth of domestic capital markets. This would help in promoting an ‘equity culture’ in India. The Scheme aims at widening the retail investor base in the Indian securities markets and also furthers the goal of financial stability and financial inclusion.

  • What is the legal provision for RGESS?

    A new section 80CCG in the Income tax Act, 1961 on ‘Deduction in respect of investment under an equity savings scheme’ was introduced vide Finance Act, 2012 and amended vide Finance Act, 2013, to give tax benefits to ‘New Retail Investors’ whose gross annual income is less than or equal to Rs.12 Lakhs, for investments in ‘Eligible Securities’ up to Rs.50,000 in a single financial year, for three consecutive assessment years.

    The details of the RGESS Scheme were first notified on 23 November 2012 (Section No. 2777(E); Notification No. 51) and vide subsequent corrigendum dated 5 December 2012 (Section No. 2835(E); Notification No. 53) by Department of Revenue. The operational guidelines were issued by SEBI on 6 December 2012. Subsequent to the Union Budget 2013-14, Section 80CCG was amended vide Finance Act, 2013, to expand the scope of the Scheme. The notification dated 23 November, 2012 was accordingly amended vide Notification dated 18 December 2013 (Section No. 3693 (E); Notification No.94).

  • Would first time investors not lose money in the equity market? Would it be too dangerous for them to invest in it?

    The investors in the RGESS run the risk of losing money in the equity market, like any other investor in the securities market. The Scheme does not provide any guarantee of assured returns. Therefore, investors under RGESS are advised to do due diligence before making any investments in the equity market. However, while designing the Scheme, safeguards like, restricting the investments to select large cap stocks, lock-in period with enough flexibility to take benefits of the positive market movements etc. have been provided to protect the interests of the first time investors.

    To give the benefit of diversification and consequent risk minimization, investments into Exchange Traded Funds (ETFs) or Mutual funds, set up as per the criteria laid down in the Scheme, are also allowed under the Scheme.

  • We already have an Equity Linked Savings Scheme (ELSS)? Why do we need RGESS?

    ELSS and RGESS are entirely different schemes: They pertain to different asset classes with ELSS offering passive investment avenues. ELSS is meant for indirect participation in the stock market, whereas RGESS aims at encouraging direct participation in the stock market. The operational differences are given below:

  • What are the benefits / highlights of RGESS compared to other tax saving schemes?

    The following are the benefits of RGESS:

    • The allowed tax deduction u/s 80CCG will be over and above the Rs. 1 Lakh limit permitted under Section 80C of the Income Tax (IT) Act, making it thus attractive for the middle class investors.
    • Further, the Dividend income is tax free, if the company is liable to dividend distribution tax.
    • The benefits can be availed for three consecutive years.
    • Investor is free to trade / churn the portfolio after the fixed lock-in period, subject to certain conditions.
    • Gains arising out of higher market valuation of RGESS eligible securities can be realized after a year viz: fixed lock-in period. Provisions exist to protect the investor from general declines in the market to a certain extent. This is in contrast to all other tax saving instruments.
    • Facility for pledging stocks after the fixed lock-in period.
    • For investments upto Rs.50,000 in your sole RGESS demat account, if you opt for Basic Service Demat Account, annual maintenance charges for the demat account is zero and for investments upto Rs. 2 lakh, it is stipulated at Rs 100.
    • The investments can be made in installments during the financial year in which tax deduction is claimed.
  • What will be the mode of holding the eligible securities?

    The Scheme is open for all New Retail Investors who have gross total income less than or equal to Rs. 12 lakh. A new retail investor is one:

    • who is a resident individual (the benefit cannot be availed by HUF, corporate entities / trusts etc)
    • who has not opened a Demat account and has also not done any trading in the derivative segment till RGESS account opening date or the first day of the “initial year” in which he brings in the RGESS eligible investment into the account, whichever is later.
    • who has opened a Demat account and has not made any transactions in equity and /or in the derivative segment till designating such account as RGESS or the first day of the “initial year” in which he brings in the RGESS eligible investment into the account, whichever is later.

    In case of joint accounts, only the first account holder will not be considered as a new retail investor. All those existing account holders other than the first demat account holder (eg. second / third account holders or other joint holders) or nominees of the existing account holders will be considered as new retail investors for the purpose of opening of a fresh RGESS account, if otherwise eligible.

    In case the demat account is opened as a first holder, but there are no transactions in the equity or derivative segment, then the first account holder is eligible to be a new retail investor.

    For taking the benefits under RGESS, the new retail investor will have to submit a declaration, as in Form ‘A’, to the Depository Participant (DP) at the time of account opening or designating his existing demat account.

    Eligible securities, which are brought thereafter into such an account, will be automatically subject to lock-in upto a value of Rs. 50,000, unless the investor specifies otherwise through the Form ‘B’ specified in this regard.

  • I am a non-resident Indian; Am I eligible for RGESS?

    The Scheme is for an individual resident in India as per the provisions of the Income Tax Act.

  • Which Quantum scheme is eligible under RGESS?

    You can avail the benefits of RGESS by investing in the Quantum Index Fund.
    Quantum Index Fund (QIF) – (An Open-ended Exchange Traded Fund, NSE Symbol – QNIFTY) makes investments in stocks of the CNX Nifty Index which also qualify for investments under RGESS, a ‘New Retail Investor’ who complies with the conditions of the RGESS shall be entitled to the benefits of RGESS for investments made in QIF.

    Product Labeling

    Name of the SchemeThis product is suitable for investors who are seeking*Riskometer
    Quantum Index Fund
    (An Open- ended Exchange Traded Fund)
    • Long term capital appreciation and current income

    • Investments in equity and equity related securities of companies in CNX Nifty Index.

    Investors understand that their principal will be at Moderately High Risk

    * Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

  • Who is a "new retail investor"?

    For RGESS eligibility a “new retail investor” refers to the following resident individuals:- (a) 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;

    (b) 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 the date of notification of the Scheme,

    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 this Scheme

Click here to view the FAQs approved by the Ministry of Finance

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