Rajiv Gandhi Equity Savings Scheme (Rgess), Mutual Fund Notification

Notification Dated 23rd November, 2012

Summary And Details of  Rajiv Gandhi Equity Saving Scheme (RGESS)

Eligible securities: New investment made in the BSE-100 or CNX-100 by the Bombay Stock Exchange and the National Stock Exchange, equity shares of public sector enterprises, Units of Exchange Traded Funds (ETFs), Mutual Fund Scheme those investing into Initial Public Offer of a public sector undertaking wherein the government shareholding is at least fifty-one per cent and Public offer of BSE-100 or CNX-100 & public sector enterprises

Eligible Investor: Any individual who has not opened a demat account and has not made any transactions in the derivative segment as on the date of notification of the Scheme and whose gross total income for the financial year in which the investment is made under the Scheme is less than or equal to ten lakh rupees.

Eligible Amount: The new retail investor may make any amount of investment in the demat account but the amount eligible for deduction, under the Scheme shall not exceed fifty thousand rupees

Holding Period of Securities: The period of holding of eligible securities shall be three years. First Year of the holding period is fixed lock-in period and the period of two years will be the flexible lock-in period in which retail investor shall be permitted to trade the eligible securities but demat account under the Scheme is compliant for a cumulative period of a minimum of two hundred and seventy days during each of the two years, the demat account shall be considered compliant for the number of days where value of the investment portfolio of eligible securities , within the flexible lock-in period, is equal to or higher than the amount claimed as investment for the purposes of deduction under section 80CCG of the Act

 

 

Details about Rajiv Gandhi Equity Savings Scheme, 2012

In exercise of the powers conferred by sub-section (1) of section 80CCG of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following Scheme, namely Rajiv Gandhi Equity Savings Scheme, 2012.:-

 

Objective of Scheme.-The objective of the Scheme is to encourage the savings of the small investors in domestic capital market.

Eligible securities means any of the following :-

(a) equity shares, on the day of purchase, falling in the list of equity declared as “BSE-100″ or ” CNX-100″ by the Bombay Stock Exchange and the National Stock Exchange, as the case may be;

(b) equity shares of public sector enterprises which are categorised as Maharatna, Navratna or Miniratna by the Central Government;

(c) Units of Exchange Traded Funds (ETFs) or Mutual Fund (MF) schemes with Rajiv Gandhi Equity Savings Scheme (RGESS) eligible securities as underlying, as mentioned in sub-clause (i) or sub-clause (ii) above, provided they are listed and traded on a stock exchange and settled through a depository mechanism;

(d) Follow on Public Offer of sub-clauses (i) and (ii) above;

(e) New Fund Offers (NFOs) of sub-clause (iii) above;

Initial Public Offer of a public sector undertaking wherein the government shareholding is at least fifty-one per cent. which is scheduled for getting listed in the relevant previous year and whose annual turnover is not less than four thousand crore rupees during each of the preceding three years; (vi) ” financial year” means a year commencing on the 1st day of April and ending on the 31stday of March;

New Retail Investor” means the following resident individuals:-

(a) any individual who has not opened a demat account and has not made any transactions in the derivative segment as on the date of notification of the Scheme;

(b) any individual who has opened a demat account before the notification of the Scheme but has not made any transactions in the equity segment or the derivative segment till the date of notification of the Scheme,

and any individual who is not the first account holder of an existing joint demat account shall be deemed to have not opened a demat account for the purposes of this Scheme

Eligibility .- The deduction under the Scheme shall be available to a new retail investor who complies with the conditions of the Scheme and whose gross total income for the financial year in which the investment is made under the Scheme is less than or equal to ten lakh rupees.

5. Procedure at time of opening demat account.-The new retail investor shall follow the following procedure at the time of opening or designating a demat account :-

 

(a) the new retail investor shall open a new demat account or designate his existing demat account for the purpose of availing the benefit under the Scheme;

(b) the new retail investor shall submit a declaration in Form A to the depository participant who will forward the same to the depository for verifying the status of the new retail investor;

(c) the new retail investor shall furnish his Permanent Account Number (PAN) while opening the demat account or designating the existing account as a Rajiv Gandhi Equity Savings Scheme eligible account, as the case may be.

 

6. Procedure for investment under Scheme.- A new retail investor shall make investments under the Scheme in the following manner :-

(a) the new retail investor may make investment in eligible securities in one or more than one transactions during the year in which the deduction has to be claimed;

 

(b) the new retail investor may make any amount of investment in the demat account but the amount eligible for deduction, under the Scheme shall not exceed fifty thousand rupees;

 

(c) the eligible securities brought into the demat account, as declared or designated by the new retail investor, will automatically be subject to lock-in during its first year, as per the provisions of paragraph 7, unless the new retail investor specifies otherwise and for such specification, the new retail investor shall submit a declaration in Form B indicating that such securities are not to be included within the above limit of investment;

 

(d) the new retail investor shall be eligible for a deduction under sub-section (1) of section 80CCG of the Act in respect of the actual amount invested in eligible securities , in the first financial year in respect of which a declaration in Form B has not been made, subject to the maximum investment limit of fifty thousand rupees;

 

(e)the new retail investor who has claimed a deduction under sub- section (1) of section 80CCG of the Act, in any assessment year, shall not be allowed any deduction under the Scheme for any subsequent assessment year;

 

(f) the new retail investor shall be permitted a grace period of three trading days from the end of the financial year so that the eligible securities purchased on the last trading day of the financial year also get credited in the demat account and such securities shall be deemed to have been purchased in the financial year itself;

 

(g) the new retail investor may also keep securities other than the eligible securities covered under the Scheme in the demat account through which benefits under the Scheme are availed;

 

(h) the new retail investor can make investments in securities other than the eligible securities covered under the Scheme and such investments shall not be subject to the conditions of the Scheme nor shall they be counted for availing the benefit under the Scheme;

 

(i) the investment under the Scheme shall consist of all eligible securities covered under the Scheme that are initially bought by the investor under the Scheme or that are bought subsequently by the investor as per the provisions of the Scheme;

 

(j) the deduction claimed shall be withdrawn if the lock-in period requirements of the investment are not complied with or any other condition of the Scheme is violated.

 

7. Period of holding requirements. –

(1) The period of holding of eligible securities shall be three years to be counted in the manner detailed hereunder.

(2) All eligible securities are required to be held for a period called the fixed lock-in period which shall commence from the date of purchase of such securities in the relevant financial year and end one year from the date of purchase of the last set of eligible securities (in the same financial year) on which deduction is claimed under the Scheme.

(3) The new retail investor shall not be permitted to sell, pledge or hypothecate any eligible security during the fixed lock-in period.

(4) The period of two years beginning immediately after the end of the fixed lock-in period shall be called the flexible lock-in period.

(5) The new retail investor shall be permitted to trade the eligible securities after the completion of the fixed lock-in period subject to the following conditions:-

(a) the new retail investor shall ensure that the demat account under the Scheme is compliant for a cumulative period of a minimum of two hundred and seventy days during each of the two years of the flexible lock-in period as laid down hereunder:-

 

(A) the demat account shall be considered compliant for the number of days where value of the investment portfolio of eligible securities , within the flexible lock-in period, is equal to or higher than the amount claimed as investment for the purposes of deduction under section 80CCG of the Act;

(B) in case the value of investment portfolio in the demat account falls due to fall in the market rate of eligible securities in the flexible lock-in period, then notwithstanding sub clause(A), –

(i) the demat account shall be considered compliant from the first day of the flexible lock-in period to the day any such eligible securities are sold during this period;

(ii) where the assessee sells the eligible securities mentioned in sub-clause (B) from his demat account, he shall have to purchase eligible securities and the said demat account shall be compliant from the day on which the value of the investment portfolio in the account becomes –

(I) at least equivalent to the investment claimed as eligible for deduction under section 80CCG of the Act or;

(II) the value of the investment portfolio under the Scheme before such sale,

whichever is less.

(6) The new retail investor’s demat account created under the Scheme shall, on the expiry of the period of holding of the investment, be converted automatically into an ordinary demat account.

(7) For the purpose of valuation of investment during the flexible lock-in period, the closing price as on the previous day of the date of trading, shall be considered.

(8) While making the initial investments upto fifty thousand rupees, the total cost of acquisition of eligible securities shall not include brokerage charges, Securities Transaction Tax, stamp duty, service tax and all taxes, which are appearing in the contract note.

(9) Where the investment of the new retail investor undergoes a change as a result of involuntary corporate actions like demerger of companies, amalgamation, etc. resulting in debit or credit of securities covered under the Scheme, the deduction claimed by such investor shall not be affected.

(10) In case of voluntary corporate actions like buy-back, etc. resulting only in debit of securities, where new retail investor has the option to exercise his choice, the same shall be considered as a sale transaction for the purpose of the Scheme.

(11) The Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) shall notify the corporate actions, referred to in sub-paragraph (9), allowed under the Scheme in this regard.

8. If the new retail investor fails to fulfil any of the provisions of the Scheme, the deduction originally allowed to him under sub-section (1) of section 80CCG of the Act for any previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax for the assessment year relevant to such previous year.

 

9.     (1) The depository shall certify the new retail investor status of the assessee at the time of designating his demat account as demat account for the purpose of the Scheme.

(2) The depository participant shall furnish an annual statement of the eligible securities invested in or traded through the demat account to the demat account holder.

10. The depository shall provide a consolidated statement of details in the electronic format, as specified in Form C, on all the Rajiv Gandhi Equity Savings Scheme beneficiaries to the Director General of Income Tax (Systems) or any other person authorised by him, within a period of thirty days from the end of the relevant financial year.

 

11. For the purpose of paragraph 10, the Director General of Income Tax (Systems) shall determine the procedures, formats and standards for furnishing of the report in electronic format in Form C by the depositories.

 

12. Assessees shall be liable to submit the relevant records to the income-tax authorities for verification, as and when required.

Form A

[See paragraph 5(b)]

Declaration to be submitted by the investors to the depository participants for availing the benefits under the Rajiv Gandhi Equity Savings Scheme.

Name of the Investor:

(first holder)

Address of the investor:

Permanent Account Number (PAN):

1. It is hereby certified that* —

 

(a) I do not have a demat account and I have not traded in any derivatives.

(b) I have demat account no _________________ in ____________________ depository participant but I have not traded in any equity shares or derivatives in this account.

(c) I have a joint demat account no _________________ in ____________________ depository participant but I am not the first account holder.

2. I hereby declare that I have read and understood all the terms and conditions of the Rajiv Gandhi Equity Savings Scheme.

3. It is hereby verified that I am an eligible new retail investor for availing the benefits under the Rajiv Gandhi Equity Savings Scheme.

4. I undertake to abide by all the requirements and fulfill all obligations under the Scheme, and will comply with all the terms and conditions of the Scheme.

5. I understand that, in case I fail to comply with any condition specified in the Scheme, the benefits availed there under will be withdrawn and the tax shall be payable by me accordingly.

 

Signature of the Investor

Place:

Date:

* Tick which ever is appropriate.

Form B

[See paragraph 6(c) and (d)]

Declaration to be submitted by the new retail investor to the depository participant on purchase of eligible securities.

To

Depository participant

Address

It is hereby informed that I have demat account no _________________ in ____________________ depository participant and the following securities

(a)

 

(b)

(c)

(d)

(e) purchased in the aforesaid demat account on ______________are not to be included as investment for the purpose of the Rajiv Gandhi Equity Savings Scheme.

 

Signature

Name of the Investor:

(first holder)

Address of the investor:

Permanent Account Number (PAN):

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2 thoughts to “Rajiv Gandhi Equity Savings Scheme (Rgess), Mutual Fund Notification”

  1. Sir I have three questions 1. We have not invested before 23rd November 2012 means is it in this Financial year ? or even 5 years before? 2. we have to purchase in our own account or can we purchase in some other’s account and get it transferred to this account 3. If we invest Rs 50,000. 50% means we are going to get Rs 25,000 exemption. If we are in 10% slab we are going to get 2,500 tax benefit. Can you please confirm the same? can some one can answer my questions. thanks & regards Rao

    1. Girdhari Ji, Rajiv Gandhi Equity Saving Scheme is only for First Time Investor, so if you had purchased any thing in your name before 31st March 2012, then you will not be eligible for deduction under RGESS
      Yes Deduction is available only when you invest in your own name
      Deduction Amount will be 50% of the Investment Amount
      for 10% Slab income tax slab net tax saving for investment of Rs 50000/- will be 2500/-

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