RGESS

On 23 November, 2012, the government notified a new tax saving scheme called the Rajiv Gandhi Equity Savings Scheme (RGESS), exclusively for first-time retail investors in the securities market. This scheme provides 50 per cent deduction of the amount invested from taxable income for that year to new investors who invest up to Rs. 50,000 and whose annual income is below Rs. 10 lakh.The Rajiv Gandhi Equity Saving Scheme (RGESS) will give tax benefits to new investors whose annual income is up to Rs. 10 lakh for investments up to a maximum of Rs. 50,000. The investor will get 50 per cent deduction of the amount invested from taxable income for that year. Salient features of the scheme are as follows :

(i) The scheme is open to new retail investors identified on the basis of their permanent account numbers (PAN).

(ii) The tax deduction allowed will be over and above the Rs. 1 lakh limit permitted allowed under Section 80 C of the IncomeTax Act.

(iii) In addition to the 50 per cent tax deduction for investments, dividend income is also tax free.

(iv) Stocks listed under BSE 100 or CNX 100, or stocks of public-sector undertakings (PSUs) that are Navratnas, Maharatnas, and Miniratnas will be eligible under the scheme. Follow-on public offers (FPOs) of these companies will also be eligible.

(v) IPOs of PSUs, which are scheduled to get listed in the relevant financial year and whose annual turnover is not less than Rs. 4,000 crore for each of the immediate past three years, will also be eligible.

(vi) Exchange-traded funds (ETFs) and MFs that have RGESS-eligible securities have also been brought under the RGESS.

(vii) To benefit small investors, investments are allowed in instalments in the year in which tax claims are made.

(viii) The total lock-in period for investments will be three years including an initial blanket lock-in of one year. After the first year, investors will be allowed to trade in the securities.

The broad provisions of the scheme and the income tax benefits under it have already been incorporated as a new Section 80 CCG of the Income Tax Act 1961, as amended by the Finance Act 2012. The operational guidelines

were issued by SEBI on 6 December, 2012.