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More reasons for you to invest in equity -
Tax Benefits under Rajiv Gandhi Equity Savings Scheme 2012
Rajiv Gandhi Equity Savings Scheme
In order to encourage flow of savings of the small investors in domestic capital market, the Government of India has announced a scheme named Rajiv Gandhi Equity Savings Scheme (RGESS), 2012. History has proven that equity as an asset class gives the highest returns among all asset classes over the long term.

A new section 80CCG under the Income Tax Act, 1961 on ‘Deduction in respect of investment under an equity savings scheme’ has been introduced to give tax benefits to ‘New Retail Investors’ who invest up to Rs 50,000 in ‘eligible securities’ and have gross total annual income less than or equal to Rs 10 lacs.

So why not take advantage of this scheme and start investing in equity markets?
How much tax deduction is offered under RGESS?
Under RGESS, you are eligible for a tax deduction on 50% of the amount invested and only investment amount upto Rs 50,000 will be eligible for availing tax benefits in RGESS. Let us say, you invest Rs 50,000 under RGESS, the amount eligible for tax deduction from your income will be Rs 25,000. Alternatively, if you invest Rs 40,000 under RGESS, the amount eligible for tax deduction will be Rs 20,000. Hence the maximum deduction you can avail is of Rs 25,000 on an investment of Rs 50,000. So if you invest Rs 1 lac in eligible securities under RGESS, the amount eligible for tax deduction will still be Rs 25,000.

This deduction of Rs 25,000 is over and above limit of Rs 1 lac currently available under Section 80C of Income Tax Act.
Who is a new retail investor?
A ‘New Retail Investor’ is any resident Individual
  • who has not opened a demat account and has not made any transactions in the equity or derivative segment as on the date of notification of the scheme i.e., November 23, 2012. Or
  • who has opened a demat account as a first holder, but has not transacted in the equity or derivate segment till November 23, 2012. Or
  • who has a demat account as a joint holder.
What are eligible securities?
  • Equity shares of companies which are included in either ‘CNX-100’ of NSE or BSE-100 or equities of public sector enterprises which are categorized as Maharatna, Navratna or Miniratna by the Central Government.
  • Exchange Traded Funds and Mutual Fund schemes with RGESS eligible securities as underlying (note Gold ETFs do not come under eligible securities).
  • Follow on public offer of BSE-100 or CNX-100 and public sector enterprises which are categorized as Maharatna, Navratna or Miniratna.
  • New fund offers of eligible mutual fund schemes.
  • IPOs of eligible public sector undertakings.
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