Rajiv Gandhi Equity Savings Scheme – Key Facts

Rajiv Gandhi Equity Savings Scheme (RGESS) an Indian government initiative aimed at attracting small investors into the capital market, which was announced by the then Finance Minister Pranab Mukherjee in his 2012-13 budget speech.The basic aim for announcing such scheme was to to encourage and motivate the savings of the small investors in domestic capital market and creating the general awareness about investment in Mutual Finds

Finally on advice of Finance Ministry Capital market regulator SEBI (Securities and Exchange Board of India) announced the framework for Rajiv Gandhi Equity Savings Scheme (RGESS), it is to remember that the deduction under the Scheme shall be available to a new retail investor.

 Basic Features and Fact About Rajiv Gandhi Equity Savings Scheme (RGESS)

1. The scheme is open to new retail investors as per SEBI guidelines the identification of new investor will be done through PAN numbers of investors. This includes those who have opened the Demat account but have not made any transaction in equity and/or in derivatives till the date of notification of this scheme and all those account holders other than the first account holder who wish to open a fresh account.

2. First-time Indian investors earning less than 10 lacs rupees a year would be eligible for a 50 percent tax break on stock investments of up to 50,000 rupees.To benefit the small investors, the investments are allowed to be made in installment in the year in which tax claims are made.

3. It will entirely the investor decision to buy stocks directly or through mutual funds or exchange traded funds.

4. To make this investment safe SEBI guidelines instruct that the  Eligible investments are restricted to the top-100 stocks traded on the Bombay Stock Exchange and National Stock Exchange, as well as state-owned companies.  This also include the public sector with status of Maharatna, Navratna, Miniratna with their FPOs and IPO of those public sector companies whose annual turnover is not less than Rs 4000 crore for each of the immediate past three years.

5. It is investor decision to buy directly or through Exchange Traded Funds.

6. All Exchange Traded Funds (ETFs) and Mutual Funds (MFs) that have RGESS eligible securities as their underlying and are listed and traded in the stock exchanges and settled through a depository mechanism have also been brought under RGESS.

7. There is three year lock in period for investor with an initial blanket lock in of  1-year ,meaning no changes can be made to the portfolio. After the first year, investors would be allowed to trade in the securities in furtherance of the goal of promoting an equity culture and as a provision to protect them from adverse market movements or stock specific risks as well as to give them avenues to realize profits. After the first year, investors would be allowed to trade in the securities

8. Investor needs to maintain the level of investment in rest of two years and claim Income tax Benefit at these two years at the amount for which they have claimed income tax benefit or at the value of the portfolio before initiating a sale transaction, whichever is less, for at least 270 days in a year. 

8) The calculation of 270 days includes those days pursuant to the day on which the market value of the residual shares/units has automatically touched the stipulated value after the date of debit.

9) SEBI also instructed that calculating the valuation of shares, the closing price as on the previous day of the date of trading will be considered so that new investors are certain about their debits and credits into the account. In case the investor fails to meet the conditions stipulated, the tax benefit will be withdrawn.

Read the Details in SEBI Guidelines : Download Here

For any queries related to Investment in RGESS, Ask it here Below.


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