Rs. 10 Lakhs G.T. Income Taxpayee can save Income Tax upto Rs. 25000/- or 50% of Saving in RGES Scheme.

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From Asstt. Year 2013-14 a new Section added in Income Tax i.e. 80CCG. This section provide Tax Benefit to Taxpayee Investors upto Rs. 25000/- or Max. 50% of saving amount in Rajiv Gandhi Equity Saving Scheme-2012. This scheme is applicable for those assessee who is resident individual and his gross Total Income does not exceed upto 10/- per annum.

Amount of deduction

The amount of deduction is at 50% of amount invested in equity shares/units. However, the amount of deduction under this provision cannot exceed Rs. 25,000.

Withdrawal of deduction

If the assessee, after claiming the aforesaid deduction, fails to satisfy the above conditions, the deduction originally allowed shall be deemed to be the income of the assessee of the year in which default is committed.

Definition of "New Retail Investors":

1. Any individual who has not opened a demat account and has made not made any transaction in the derivative segment.
2. Any individual who has opened a demat account but has not made any transaction in the equity or derivative segment.
3. Any individual who is not the first account holder of existing joint demat account shall be deemed to have not opened a demat account.

Eligible Investments:

1. Equity Share in BSE-100 or CNX-100
2. Equity shares of Maharatna, Navratna, Miniratna Compaines
3. Units of eligible Exchange Traded Funds and Mutual Funds
4. Follow on public offer on 1 and 2 above
5. Initial Public Offer of eligible public sector undertaking i.e. PSUs in which government shareholding is at least 51% which is scheduled for getting listed and whose annual turnover is not less than 4000 crore rupees during each of preceding 3 years.

The Salient features of the Scheme are as under:

• Scheme is open to new retail investors, identified on the basis of their PAN numbers. 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.
• Those investors whose annual taxable income is up to Rs. 10 Lacs are eligible under the Scheme.
• 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.
• Under the Scheme, those stocks listed under the BSE 100 or CNX 100, or those of public sector undertakings which are Navratnas, Maharatnas and Miniratnas would be eligible. Follow-on Public Offers (FPOs) of the above companies would also be eligible under the Scheme. IPO’s of PSU’s, which are getting listed in the relevant financial year and whose annual turnover is not less than Rs. 4000 Crore for each of the immediate past three years, would also be eligible.
• The best part is that, 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.
• To benefit the small investors, the investments are allowed to be made in installments in the year in which tax claims are made.
• 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.
• 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.
• Investors would, however, be required to maintain their level of investment during these 2 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. 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.
• The general principle under which trading is allowed is that whatever is the value of stocks / units sold by the investor from the RGESS portfolio, RGESS compliant securities of at least the same value are credited back into the account subsequently. However, the investor is allowed to take benefits of the appreciation of his RGESS portfolio, provided its value, as on the previous day of trading, remains above the investment for which they have claimed income tax benefit.
• For the purpose of 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.

Procedure for investment under the Scheme:A new retail investor shall make investments under the Scheme in the following manner, namely:-

• the new retail investor may invest in one or more financial years in a block of three consecutive financial years beginning with the initial year;
• the new retail investor may make investment in eligible securities in one or more than one transaction during any financial year during the three consecutive financial years beginning with the initial year in which the deduction has to be claimed;
• the new retail investor may make any amount of investment in the demat account but the amount eligible for deduction under the Scheme shall not exceed fifty thousand rupees in a financial year;
• the new retail investor shall be eligible for the tax benefit under the Scheme only for three consecutive financial years beginning with the initial year, in respect of the investment made in each financial year;
• if the new retail investor does not invest in any financial year following the initial year, he may invest in the subsequent financial year, within the three consecutive financial years beginning with the initial year, in accordance with the Scheme;
• the eligible securities brought into the demat account, as declared or designated by the new retail investor shall be under a lock-in for a period of three years in accordance with the provisions of paragraph 7;
• the eligible securities brought into the demat account, in respect of which the assessee is eligible for deduction under the Scheme, shall be under a fixed lock-in during the first year, as per the provisions of the paragraph 7, unless the new retail investor specifies otherwise, and for such specification, the new retail investor shall submit a declaration in Form B, either in electronic or physical form, to the depository participant indicating that such securities are not to be included within the above limit of investment;
• the new retail investor shall be eligible for a deduction under sub-section (1) of section 80CCG of the Act in respect of the actual amount invested in eligible securities and in respect of which a declaration in Form B has not been made, subject to the maximum investment limit of fifty thousand rupees in a financial year;
• the new retail investor who has claimed a deduction under sub- section (1) of section 80CCG of the Act in any assessment year shall not be allowed any deduction under the Scheme for the same investment for any other assessment year;
• the new retail investor shall be permitted a grace period of seven trading days from the end of the financial year so that the eligible securities purchased on the last trading day of the financial year also get credited in the demat account and such securities shall be deemed to have been acquired in the financial year itself;
• the new retail investor can make investments in securities other than the eligible securities covered under the Scheme and such investments shall not be subject to the conditions of the Scheme nor shall they be counted for availing the benefit under the Scheme;
• the deduction claimed shall be withdrawn if the lock-in period requirements of the investment are not complied with or any other condition of the Scheme is contravened by the new retail investor.