Understanding the Rajiv Gandhi Equity Savings Scheme, 2012 (RGESS)
The Government of India vide
notification dated November 23, 2012 announced the Rajiv Gandhi Equity Savings
Scheme, 2012, to offer tax benefits to the ‘New Retail Investor’ by investment
in eligible securities, with an objective to encourage flow of savings of the
small investors in domestic capital market.
What are the tax savings?
Deduction of 50% of the amount
invested in the eligible securities is available under section 80CCG upto Rs.
25,000/- from the total income of the Assessee. The deduction under this
section is in addition to the deduction of Rs. 1,00,000/- available under
Section 80C of the Act.
The amount of investment shall exclude
brokerage charges, securities transaction tax, stamp duty, service tax and
other taxes appearing in the contract note.
However, at present the deduction
can be claimed by an Assessee for only one assessment year i.e. the deduction
is not allowed if the Assessee has claimed it in any earlier Assessment year.
Who is the New Retail Investor?
A new retail investor is a person
who does not have a demat account at present or who has a demat account but has
not done any transaction till the date of notification i.e. November 23, 2012 .
As per the scheme the person 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 purpose of this scheme.
Other conditions for eligibility under section 80CCG
A. The benefit under section
80CCG is available only if:
- The Assessee is a resident individual; and
- The gross total income of the Assessee is less than Rs. 10 Lakh.
B. Lock-in Period:
Total Lock in
period under the scheme is of three years and includes ‘Fixed Lock-in’ period
of one year and ‘Flexible Lock-in’ period of two years.
(i) Fixed
Lock-in period:
Commencement: Date of purchase of eligible
securities.
Duration/ End: One
year from the date of purchase of the last set of eligible securities.
During the
Fixed Lock-in period eligible securities cannot be sold / pledged/ hypothecated.
(ii) Flexible
Lock-in period:
Commencement: At the end of the Fixed Lock-in
period.
Duration/ End: Two
years.
During the
Flexible Lock in period eligible securities can be sold/ pledged/ hypothecated
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.
C. If the Assessee fails to
comply with any condition of the scheme, the deduction originally allowed to
him shall be deemed to be the income of the Assessee in the Assesseement year
relevant to such previous year in which the default takes place.
How to avail the benefit?
Step 1: Open a new demat account
with any depository participant or designate your existing demat account under
the RGESS Scheme. A Declaration in the Form A has to be submitted by the
Assessee to the Depository Participant for availing the benefit under the RGESS
Scheme.
Step 2: Start Investing by
approaching any SEBI registered stock broker or Mutual fund distributor of your
choice or may apply for IPO/NFO of RGESS compliant companies/ funds by
mentioning the Demat Account Number and DP ID of the designated account in the
IPO/ NFO application form.
Step 3: Furnish Form B to the Depository participant
for the securities in the designated account for which the Assessee does not
wants to be included while claiming deduction under Section 80CCG.
Step 4: Claim deduction of 50% of
the amount invested in the eligible securities under section 80CCG while
furnishing your return of income on the basis of investment made in terms of
the scheme.
Step 5: The Designated RGESS demat account will be
converted into regular or ordinary demat account at the end of the flexible
lock-in period.
What are Eligible Securities?
Eligible securities considered
for RGESS investment are:
1.
Equity shares of selected companies which includes:
a.
Companies falling under the list of ‘CNX-100’ of NSE or
‘BSE-100’
b.
Public sector enterprises categorized as Maharatna,
Navratna or Miniratna by the Central Government.
2.
Units of Mutual Fund (MF) schemes which are RGESS
compliant
3.
Units of Exchange traded funds (ETFs) which are RGESS
compliant
4.
IPOs / NFOs of above mentioned companies/ funds
List of RGESS eligible stocks /
ETFs/ MF schemes is available on the following links:
Text of Section 80 CCG of the Income Tax Act, 1961:
Deduction in respect of investment made under an equity savings
scheme.
80CCG. (1) Where an assessee, being a resident individual,
has, in a previous year, acquired listed equity shares in accordance with a
scheme, as may be notified by the Central Government in this behalf, he shall,
subject to the provisions of sub-section (3), be allowed a deduction, in the
computation of his total income of the assessment year relevant to such
previous year, of fifty per cent of the amount invested in such equity shares
to the extent such deduction does not exceed twenty-five thousand rupees.
(2) Where an assessee has claimed and allowed a deduction under
this section for any assessment year in respect of any amount, he shall not be
allowed any deduction under this section for any subsequent assessment year.
(3) The deduction under sub-section (1) shall be subject to the
following conditions, namely:—
(i) the gross total income of the
assessee for the relevant assessment year shall not exceed ten lakh rupees;
(ii) the assessee is a new retail investor as
may be specified under the scheme referred to in sub-section (1);
( (iii) the
investment is made in such listed equity shares as may be specified under the
scheme referred to in sub-section (1);
(iv) the
investment is locked-in for a period of three years from the date of
acquisition in accordance with the scheme referred to in sub-section (1); and
(v) such other condition as may be prescribed.
(4) If the assessee, in any previous year, fails to comply with
any condition specified in sub-section (3), the deduction originally allowed
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.
Text of Notification dated 23rd November
2012 :
[TO BE PUBLISH ED IN PART II, SECTION 3, SUB-SECTION (ii) OF THE GAZETTE OF INDIA,
EXTRAORDINARY, DATED THE 23rdNovember, 2012]
Government of India
Ministry of Finance
Department of Revenue
Notification
(Income-tax)
S.O.
2777(E).— 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:-
1.
Short title, commencement and application. - (1) This Scheme may be called the Rajiv Gandhi Equity Savings Scheme,
2012.
(2)
It shall come into force on the date of its publication in the Official
Gazette.
(3) This Scheme shall apply for claiming deduction in
the computation of total income of the assessment year relevant to a previous
year on account of investment in eligible securities under sub-section (1) of
section 80CCG of the Income-tax Act, 1961.
2. Objective of Scheme.-The objective of the Scheme is to encourage the
savings of the small investors in domestic capital market.
3. Definitions.- In this Scheme, unless the context otherwise requires,-
(i) “Act” means the Income-tax Act, 1961 (43 of 1961);
(ii) “demat account” means an account opened with the
depository participant in accordance with the guidelines laid down by the
Securities and Exchange Board of India established under section 3 of the
Securities and Exchange Board of India Act, 1992 (15 of 1992);
(iii) “depository” means a company as defined in
clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of
1996);
(iv) “depository participant” means a participant as
defined in clause (g) of sub-section (1) of section 2 of the Depositories Act,
1996 (22 of 1996);
(v) “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 (RGES S) 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;
(f) 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;
(vii) “Form” means the Form appended to the Scheme;
(viii) “investment” means investment by an assessee in
any of the eligible securities in accordance with the Scheme;
(ix) “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
(x) “Scheme” means the Rajiv Gandhi Equity Savings
Scheme;
(xi) words and expressions used and not defined in this Scheme, but
defined in the Act, shall have the meanings respectively assigned to them in
the Act.
4. 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.
[ Notification No. 51 /2012 F. No. 142/35/2012 –TPL)
(Raman Chopra)
Director (TPL -II)
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):
Form C
[See paragraphs 10 and 11]
Annual report to be submitted by the depository to the
Income Tax Department in Electronic Format before 30th April.
(For 80 CCG benefits of Financial Year 2012-13)
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2012-13
Report to be furnished by
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2013-14
Report to be furnished by
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2014-15
Report to be furnished by
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2015-16
Report to be furnished by
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Namee
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PAN
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DEMAT A/c No.
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Date of opening A/c
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Date of investment for the Purpose
of lock-in (date of making the last investment in RGESS# eligible scrip)
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Amount of Investment
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Scrips locked in RGESS#
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Whether A/c eligible under the
RGESS# Scheme
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Whether A/c compliant with RGESS#
with respect to fixed lock-in*
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Whether A/c compliant with RGESS#
with respect to 270 days period*
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Whether A/c compliant with RGESS#
with respect to 270 days period*
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**The Financial Year shall be enhanced by one Financial Year every year. March, 2013.
#RGESS means the Rajiv Gandhi Equity Savings Scheme.
Disclaimer: This article is for information only. In case of any
differences with the provisions of the Income Tax Act, 1961 or RGESS Scheme,
2012, the provisions of the Income Tax Act, 1961 or the RGESS Scheme, 2012, as
the case may be, shall prevail. The Author does not undertake any
responsibility for any action taken by the readers on the basis of the above
information and will not be liable for any loss incurred by any person due to
such action. All readers are advised to consult their tax advisers or consultants before
making any investment under the aforesaid scheme.
