**Rajiv Gandhi Equity Saving Scheme (RGESS) is a newinitiative by the government of India aimed atencouraging first time investors to channelizetheir savings into the capital markets.*As an incentive, a one time deduction will beavailable to the new retail investor on the 50% ofthe amount invested in ‘eligible securities’ in thefinancial year, subject to maximum investment limitof Rs 50,000.*For the purpose of claiming benefit under RGESS,the investor needs to invest in select approvedsecurities as notified by the government.
** It provides additional tax benefits over and above thepresent tax savings schemes under the Income Tax Act.* Gains, arising of investments in RGESS, can be realized aftera year. This is in contrast to all other tax saving instruments.* Investments are allowed to be made in instalments in theyear in which the tax claims are filed.* Dividend payments are tax free.* This scheme has a long run benefit of educating the retailinvestment segment and thereby moving towards financialinclusivity in the country.* Success of this scheme can lead to transfer of assets fromtraditional savings instruments such as bank deposits and FDsto the capital markets, leading to diversification in retailinvestor portfolio and also leading to more productive"capital formation" assets.
*Equity Shares in BSE-100 orCNX-100Equity Shares Of Maharatna,Navratna and MiniratnaUnits Of Eligible ETFs andMFsEligible FPOs & NFOs andIPOs of PSUs.
**BHARAT HEAVY ELECTRICALS LTD.*COAL INDIA LTD.*GAIL (INDIA) LTD.*INDIAN OIL CORP.LTD.*NTPC LTD.*OIL & NATURAL GAS CORP.LTD.*STEEL AUTHORITY OF INDIA LTD.Source: Department of Public Enterprises (as on Feb,2013)
** BHARAT ELECTRONICS LTD.* BHARAT PETROLEUM CORP.LTD.* HINDUSTAN AERONAUTICS LTD.* HINDUSTAN PETROLEUM CORP.LTD.* MAHANAGAR TELEPHONE NIGAM LTD.* NATIONAL ALUMINIUM CO.LTD.* NEYVELI LIGNITE CORP.LTD.* NMDC LTD.* OIL INDIA LTD.* POWER FINANCE CORP.LTD.* POWER GRID CORP.OF INDIA LTD.* RASHTRIYA ISPAT NIGAM LTD.* RURAL ELECTRIFICATION CORP.LTD.* SHIPPING CORP.OF INDIA LTD.,THESource: Department of Public Enterprises (as on Feb, 2013)
*The lock-In period of the scheme is for three(3) years.There are two types of Lock-In for RGESS*Fixed Lock-In:The fixed Lock in period is for one (1) years i.e. fromthe date of investment into the scheme.*Flexible Lock-In:The flexible Lock-In is for next two (2) years of thescheme.
*In flexible Lock-In, the investor is permitted to trade subject to beingcompliant for minimum 270 days in each flexible lock in year.Compliant Conditions:* Maintenance of value of RGESS portfolio => amount claimed as invested* If there is fall in the RGESS portfolio due to market fluctuations withoutany sale, then you are a compliantFall in the value Due to Sale:* Should be compliant till the date of sale* After the sale:RGESS portfolio = Amt claimed as RGESS investmentORRGESS portfolio= Value of RGESS portfolio before sale(whichever is lesser)
**While there is no restriction on investment, only Rs50,000 is considered for tax purposes. Of this, only50%, or Rs 25,000, is allowed as deduction.*Since RGESS is for people with income less than Rs10 lakh, they will fall in the 10% or 20% tax bracket.The maximum tax savings under this will be Rs5,000 for people in the 20% tax bracket and Rs2,500 for those under 10% (beyond the Section80C benefits).*Besides, the tax savings are only for the first year,not subsequent years. So, those who dont haveenough money or time to invest Rs 50,000 in 2012-13 should consider postponing it to 2013-14