Rajiv Gandhi Equity Savings Scheme or RGESS is a new equity tax advantage savings scheme for equity investors in India, with the stated objective of “encouraging the savings of the small investors in the domestic capital markets.”. It was approved by the Union Finance Minister, P. Chidambaram on September 21, 2012. It is exclusively for the first time retail investors in securities market. This Scheme would give tax benefits to new investors who invest up to Rs. 50,000 and whose gross annual income is below Rs. 10 lakh.
The Scheme encourages the flow of savings and improves the depth of domestic capital markets, as also aims to promote an ‘equity culture’ in India. This is also expected to widen the retail investor base in the Indian securities markets.
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.
- It provides additional tax benefits over and above the present tax savings schemes under the Income Tax Act.
- Gains, arising of investments in RGESS, can be realized after a year. This is in contrast to all other tax saving instruments.
- Investments are allowed to be made in installments in the year in which the tax claims are filed.
- Dividend payments are tax free.
Rather than invest directly, investors may invest in Index Funds or Index based ETFs like QNifty(Quantum) or GS NiftyBEES(Goldman Sachs)
Dear Sir,
1. I can only humbly submit that the first thing I do once I log on the net is to check whether there has been another post from you.. I can proudly say that u have been instrumental in weening me away from the ‘Safe investments’ and introducing me to the world of equities. I haven’t been able to find much more lucid articles on the sub than yours. Pls continue the good wk.
2. I have not been able to view Recommended Books sec lately, try as i might.. can u pls resolve this issue.
3. Further, although I am apperaing for DSSC this yr and dont have much spare time, but i would still like to learn more on the sub, whenever I take a break.. can u pls guide me as to how to go about it. I have planned to put in some money every month in my demat acct and buy shares whenever their prices fall.. Do u think its a correct strategy or shall I head for an index based fund?
4. Thanking you
Anshul
Dear Anshul,
Thanks for the kind words. It makes it worthwhile.
In so far as your investments are concerned. Start with the Mutual Fund Route. Divide your investible surplus (which you will not have to scrounge upon in terms of an emergent need. Read my first blog on NEED vs GREED
50% of that should go in Mutual Funds on an autopilot mode like your Provident Fund. These could be Index Based Funds, Index Based ETFs or a Long Term Large/MidCap Equity Fund. Use a direct investor option to cut out the middlemen.
With the balance 50% put it into a separate account so that emotionally you are not tempted to spend those savings on life style products. Identify your list of stocks based on my earlier blogs. Which Business Should I Buy Into?
Books Recommended is being modified. I am going to post book reviews along with the books I recommend. After your exams, start reading these books in the sequence in which I post the reviews. That becomes an unstructured course for the first time investor. I personally wish someone had guided me to read these books 22 years ago when I first made my investments. But then there was no Internet. :-). The books were there. The first review should be up in a couple of days. I have read the books earlier, I am reviewing them now. Please bear, patience, my dear.
All the best.
I think it is applicable only to new investors;i think only those who openen/opened a demat acct after 01 jan 2011 or 2012(not very sure) qualify as new investors.Correct me if i am wrong
You are correct. SEBI has to clarify a number of these issues, still. Eligibility Criteria is as follows:-
Demat Account Not Opened
No transactions in Equity or F&O
Resident Individual
Annual Income < =Rs. 10 lakh If Demat Account already Opened, No transactions in Equity or F&O 2nd & 3rd holder of an account can open a new account as 1st holder The tax deduction under RGESS shall be available to a new retail investor whose gross total income for the financial year (1 April to 31 March) in which the investment is made under the Scheme is less than or equal to 10 lakh rupees. A new retail investor is defined as follows: 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 Any resident Individual 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 Any resident Individual who has a demat account as a joint holder.