RGESS (Rajiv Gandhi Equity Savings Scheme)

Finance Minister P. Chidambaram has expressed the need revisit theRajiv Gandhi Equity Savings Scheme (RGESS) to make its provisions more retail investor-friendly. It was felt by the minister that the in current form the scheme is too complex for the small investor to understand and that complying would be difficult. He is expected to bring necessary changes to in the coming Budget.

The finance ministry is set to notify the Rajiv Gandhi Equity Savings Scheme (RGESS).

• Finance Minister P Chidambaram had approved the RGESS on September 21, 2012.
• Implementation delayed due to the deliberations on inclusion of Mutual Funds (MF) in it. Thus, further consultations with the RBI, SEBI and the law ministry on the coverage of RGESS.

• It might be so that only MFs fitting in specific conditions would be allowed.
• Tax benefits for investing up to Rs 50,000 in the capital markets for first-time retail investors with an annual income of Rs 10 lakh.
• The scheme initially announced in Budget 2012 had allowed tax benefits for investments in stocks. Later, Exchange Traded Funds (ETFs) and MFs were included under its ambit.
• Open to retail investors who have opened demat accounts but have not made any transactions in equity or derivatives till the notification of the scheme.
• All those opening fresh accounts would also be eligible to participate in RGESS.
• Investments can be made in various installments during a year,
• Total lock-in period: 3 years, including an initial lock-in of one year in the stock/ETF/MF in which the money has been invested.
• Stocks listed under BSE 100 or CNX 100 or those of PSUs which are Navratnas, Maharatnas and Miniratnas would be eligible.
• Investment in follow-on offers of these companies would also be eligible for tax deduction.