The Rajiv Gandhi Equity Savings Scheme (majorily referred to as RGESS), is a tax saving scheme announced in the 2012-2013 Union Budget of India, focused at first time retail investors. Named after Rajiv Gandhi, the sixth Prime Minister of India, the project was announced by the finance minister, P. Chidambaram, on 21 September 2012. The scheme is focused on encouraging the flow of savings of small investors in the domestic capital market and presents investors with tax benefits provisioned as a new section, 80CCG, in the Income Tax Act. The 2017 Union budget of India has proposed that the scheme is phased out wholly by 2018, citing the lack of adoption.
RGESS was introduced with the objective of encouraging savings from small retail investors to enter domestic capital markets. The scheme also focuses on improving the retail participation in equity markets, and to promote an ‘equity culture’ in India. Majorily its one of the best investment in tax saving in India.
The scheme can be benefited to Indian residents with an annual income not exceeding Rs: 12 lakhs. In addition, for a person to be eligible, he should not have had a Demat account before 23 November 2012, or should only have a Demat account that has never been used to trade. There is a lock-in period of three years.
RGESS allows investments totaling up to a maximum of Rs: 50,000, of which, 50% is tax deductible. The highest possible tax savings is Rs: 5150. In addition, the scheme is provisioned to give the tax break over the Rs: 1Lakhs.
The securities eligible for investments in the scheme are equities listed in BSE 100 or CNX 100, shares of public sector companies categorized by the Government as Maharatna, Navratna, or Miniratna. Select ETFs and Mutual funds, and IPOs of public sector undertakings fulfilling certain criteria, are also eligible.