Note on 80 CCG

Finance Act 2012 has inserted a new section 80 CCG, This will be applicable for the A.Y. 2013-14.

Following conditions must be fulfilled to claim this deduction:

i. The gross total income of the assessee for the relevant Assessment Year should not exceed Rs. 10,00,000. 

ii. The assessee must be an individual New retail investor, the details of which will be specified by the Government in due course when the detailed scheme is being framed. 

iii. The investment is made by the individual only in such listed equity shares as will be specified by a detailed scheme to be announced at a later date.

iv. The investment in equity shares is locked  for three years from the date of acquisition. 

v. Any other conditions which may be prescribed by the Government in due course. 

In present section benefit of this scheme is available only once in life time.  Because this deduction is available only to new retail investor.  So if a person has already been taken benefit of this section once then next time he will not be new retail investor.  This section or Act doesn’t define who “New Retail Investor” is.  But if we took common meaning then we can say a person who opened his first demat account will be new retail investor for first year. Next year he will not be considered as New Retail investor. So he will not be able to get benefit of this scheme. So we can say, to get benefit of this scheme a person need to open his/her first Demat account and get benefit of this scheme in same year.

For this deduction individual will invest in specified listed shares.  Moreover he must keep these shares in his/her name for 3 years from the date of acquisition. If the assessee, sell his shares before 3 years then the allowed deduction will be deemed income of the year in which default is made.

The amount of deduction is 50% of amount invested in equity shares. However this deduction can’t be more than 25,000/-.  So if a person invest more than 50,000/- in this scheme then also he can claim only 25,000/- max.   One more point in that if a person invest only 20,000,/- this year  and 20,000/- in next year then he will get benefit of only Rs. 10,000/- in this year.  Because as clarify above he will be new retail investor only for first year.  So he will not get any benefit of next 20,000/- which he invested next year in this scheme.

This deduction will not be included in 1 lakh limit of 80 C, 80CCC and 80 CCD.

Section 80CCG doesn’t restrict any individual to take benefit of this scheme. So a salaried person also can get benefit of this scheme.

If the assessee, sell his shares before 3 years then the allowed deduction will be deemed income of the year in which default is made.

Illustration:

Mr. A (a salaried person) took has gross total income of Rs. 8 lakh in F.Y. 2012-13. For taking benefit of this scheme he opened a demat account and invest Rs. 36000/- in notified shares of this scheme. He will get benefit of Rs. 18000/- in A.Y. 2013-14.

Mr. C a businessman who has gross total income of Rs. 17 lakh opened a new demat account and invest in notified shares. But he will not get benefit of this scheme as his gross total income is more than 10 lakh.

Mr. Z a shopkeeper whose income is 5 lakh invested Rs 40,000/- in this schem on 1^st July 2012. He got benefit of Rs. 20,000/- in A.Y. 2013-14 He sold these shares on 30-6-2014. Because he sold shares before 3 years so the full benefit (Rs. 20,000/-) will be added in his income of F.Y. 2014-15.