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AS Chakravarthy NCFM Hyderabad : Stock Market Training Institute
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Rajiv Gandhi Equity Savings Scheme, 2012 (RGESS)
INITIATION OF RGESS
Encouraging flow of savings of the small investors in domestic capital market is the main objective the Government of India (GOI) announced a scheme named Rajiv Gandhi Equity Savings Scheme, 2012 (RGESS) vide its notification dated November 23, 2012 ) to offer tax benefits to ‘New Retail Investors’. ‘New Retail Investors’ will be eligible for additional tax benefit up to Rs.25,000 under Section 80CCG up to a maximum investment Rs.50,000 made in eligible securities. The scheme was announced in the 2012-2013 budget. However, it never became popular because of the many conditions it places on individuals to qualify to make investments in it. RGESS was introduced with the goal of encouraging savings from small retail investors to enter domestic capital markets. The scheme also aims at improving the retail participation in equity markets, and to endorse an ‘equity culture’ in India. Essentially T its one of the best investment in tax saving schemes. he scheme can be availed by Indian residents with an annual income not exceeding Rs: 12 lakhs. In inclusion, for a person to be eligible, he should not have had a demat account prior to 23 November 2012, or should only have a Demat account that has never been used to trade. There is a lock in period of three years. RGESS permits investments totaling up to a maximum of Rs: 50,000, of which, 50% is tax deductible. The maximum possible tax savings is Rs: 5150. In addition, the Scheme is provisioned to provide the tax break over the Rs: 1Lakhs.The scheme has a fixed lock-in period of one-year during which you cannot sell any securities or units. You can’t also pledge them to get loans. For the next two years, you are permitted to buy and sell eligible securities, provided that you maintain the value of your initial investment.
Investor eligible will be required to submit specified form to the Depository Participant at the time of account opening or designating their existing demat account for taking the benefits under RGESS. Investor will be required to invest in eligible securities considered for RGESS investment, which are follows:
a. Equity shares of selected companies which includes;
1) Companies falling in the list of ‘CNX-100’ of NSE or ‘BSE-100’
2) Public sector enterprises categorized by the Central Government as Maharatna, Navratna or Miniratna.
b. Mutual Fund (MF) unit schemes which are RGESS compliant.
c. Exchange Traded Funds (ETFs) units which are RGESS compliant
d. Following public offers (IPOs and New Fund Offers) of above all mentioned companies/funds.
Investors will be enforced to ensure to provide demat account details i.e., Demat Account Number and DP ID on the concerned applicable form. The mode of holding eligible securities will always be in a demat account. Other securities (viz., equity shares, debentures, bonds, mutual fund units, etc.) can also be held in the demat account designated for RGESS. In case investors do not wish certain securities credited to their demat accounts to be considered for the RGESS, then they will be required to submit declaration in a prescribed format within one month from the date of transaction.
BOTTOMLINE
The RGESS mutual fund schemes have offered double-digit returns in the past one year. One of the best performers in the category is HDFC Rajiv Gandhi Equity Savings Scheme - Series 2, which returned 10.63 per cent in the past year. Beginner, understanding and managing the equity investments might be a tedious task. So, RGESS mutual fund schemes would be a better choice for them.
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