Rajiv Gandhi Equity Saving Scheme (RGESS)-Section 80CCG
Section 80CCG of the Income-tax Act is related to Rajiv Gandhi Equity Savings Scheme, 2012 (RGESS). RGESS was introduced to encourage participation of small investors in the equity markets.
Rajiv Gandhi Equity Savings Scheme, 2012 (RGESS) stipulates that
1. Investor should be a new retail investor. The investor must be using a demat account the first time ever for equities or if had a demat account, should have never traded in equities using demat account before.
2. Investor must be a resident. Rajiv Gandhi Equity Savings Scheme, 2012 (RGESS) is not extended to NRIs.
3. Income of investor should not exceed Rs 12 lakhs.
4. The investment must be locked for a period of 3 years from the date of acquisition
5. Investment must be done in
(i) Shares belonging to BSE-100, NSE-100, maharatnas, navratnas or miniratnas. IPOs of these companies or IPOs of PSUs with 51% government shareholding are also eligible.
(ii) Mutual funds and ETFs investing in the above shares are eligible for tax saving through RGESS. NFOs of such funds are also eligible for 80CCG (RGESS) deduction.
How much is the deduction allowable under section 80 CCG?
Deduction allowable under section 80CCG is 50% of the amount invested in equity shares. Maximum permissible investment is Rs. 50,000 andhence the maximum amount that can be claimed under 80CCG is Rs. 25,000/- .
Deduction under section 80 CCG is independent of the deduction made under section 80 C ( Tax Saver investments/expenditures) and section 80 CCD.
Whether investment under section 80CCG can be spread over?
Initially, it was envisaged that if any deduction was claimed by a taxpayer in an year, he would not be eligible for any further deduction under the section. However, now deduction is allowed for 3 consecutive years within the maximum permissible investment of Rs. 50,000/- / deduction of Rs. 25,000/-.
If the taxpayer after claiming the deduction fails to satisfy the stipulated conditions, the deduction originally allowed will be deemed to be the income of the assessee of the year in which default is committed.
