Rajiv Gandhi Equity Savings Scheme (RGESS) Tax Benefits u/s 80CCG, Stocks & Mutual Funds

Who can invest in RGESS?

New retail investors with an annual gross income of less than Rs.10 Rs.12 lakhs.

How much can I invest?

The maximum amount eligible for claiming benefit under RGESS is Rs. 50,000.

Tax Benefit

Deduction under Section 80CCG of the Income-Tax Act, 1961, is available on 50% of the amount invested. The benefit is in addition to deduction available u/s Sec 80C.

Lock-in Period

3 years. Fixed lock-in during first year followed by a flexible lock-in for subsequent two years.

AIM: To encourage the savings of the small investors in domestic capital market.

Rajiv Gandhi Equity Savings Scheme (RGESS) announced in Union Budget 2012-13 is a new equity tax advantage savings scheme for equity investors in India. The scheme got it’s approval on September 21, 2012. It is exclusively for the first time retail investors in securities market.

The investors who invest up to Rs.50,000 in ‘Eligible Securities’ and have gross total annual income less than or equal to Rs.10Rs.12 Lakhs will benefit from a new section 80CCG under the Income Tax Act, 1961 on ‘Deduction in respect of investment under an equity savings scheme’ has been introduced to give tax benefits.

Example:
Let us say, you invest Rs.50,000 under RGESS, the amount eligible for tax deduction from your income will be Rs.25,000. Alternatively, if you invest Rs.40,000 under RGESS, the amount eligible for tax deduction will be Rs.20,000. So you may save about Rs.2,575, Rs.5,150 for income tax slabs 10% and 20% respectively under this scheme.

Eligible Stocks

S&P BSE 100 Index Scrips

BSE S&P 100 is a broad based index comprising of 100 large, well established and financially sound companies across sectors.

Company NameSymbol
ABB India Ltd500002
ACC Ltd500410
Adani Enterprises Ltd512599
Adani Ports and Special Economic Zone532921
Adani Power Ltd533096
Aditya Birla Nuvo Ltd500303
Ambuja Cements Ltd500425
Ashok Leyland Ltd500477
Asian Paints Ltd500820
Axis Bank Ltd532215
Bajaj Auto Ltd532977
Bank of Baroda532134
Bank of India532149
Bharat Forge Ltd500493
Bharat Heavy Electricals Ltd500103
Bharat Petroleum Corp Ltd500547
Bharti Airtel Ltd532454
Cairn India Ltd532792
Canara Bank532483
Cipla Ltd/India500087
Coal India Ltd533278
Colgate-Palmolive India Ltd500830
Crompton Greaves Ltd500093
Cummins India Ltd500480
Dabur India Ltd500096
Divi’s Laboratories Ltd532488
DLF Ltd532868
Dr Reddy’s Laboratories Ltd500124
Exide Industries Ltd500086
Federal Bank Ltd500469
Gail India Ltd532155
Glenmark Pharmaceuticals Ltd532296
GMR Infrastructure Ltd532754
Godrej Consumer Products Ltd532424
Grasim Industries Ltd500300
HCL Technologies Ltd532281
HDFC Bank Ltd500180
Hero MotoCorp Ltd500182
Hindalco Industries Ltd500440
Hindustan Petroleum Corp Ltd500104
Hindustan Unilever Ltd500696
Hindustan Zinc Ltd500188
Housing Development & Infrastructure Ltd532873
Housing Development Finance Corp500010
ICICI Bank Ltd532174
IDBI Bank Ltd500116
Idea Cellular Ltd532822
IDFC Limited532659
Indian Oil Corp Ltd530965
IndusInd Bank Ltd532187
Infosys Ltd500209
ITC Ltd500875
Jaiprakash Associates Ltd532532
Jindal Steel & Power Ltd532286
JSW Steel Ltd500228
Kotak Mahindra Bank Ltd500247
Larsen & Toubro Ltd500510
LIC Housing Finance Ltd500253
Lupin Ltd500257
Mahindra & Mahindra Financial Services Ltd532720
Mahindra & Mahindra Ltd500520
Maruti Suzuki India Ltd532500
Nestle India Ltd500790
NHPC Ltd533098
NMDC Ltd526371
NTPC Ltd532555
Oil & Natural Gas Corp Ltd500312
Power Finance Corp Ltd532810
Power Grid Corp of India Ltd532898
Punjab National Bank532461
Ranbaxy Laboratories Ltd500359
Reliance Capital Ltd500111
Reliance Communications Ltd532712
Reliance Industries Ltd500325
Reliance Infrastructure Ltd500390
Reliance Power Ltd532939
Rural Electrification Corp Ltd532955
Sesa Sterlite Ltd500295
Shriram Transport Finance Co Ltd511218
Siemens India Ltd500550
State Bank of India500112
Steel Authority of India Ltd500113
Sun Pharmaceutical Industries Ltd524715
Tata Chemicals Ltd500770
Tata Consultancy Services Ltd532540
Tata Global Beverages Ltd500800
Tata Motors Ltd500570
Tata Power Co Ltd500400
Tata Steel Ltd500470
Tech Mahindra Ltd532755
Titan Co Ltd500114
UltraTech Cement Ltd532538
Union Bank of India532477
Unitech Ltd507878
United Breweries Ltd532478
United Spirits Ltd532432
UPL Ltd512070
Wipro Ltd507685
Yes Bank Ltd532648
Zee Entertainment Enterprises Ltd505537

source: spindices.com (as on feb, 2014)

 

CNX NSE 100 Index Scrips

NSE CNX 100 is a diversified 100 stock index accounting for 38 sectors of the economy.

Company NameSymbol
ACC Ltd.ACC
Adani Enterprises Ltd.ADANIENT
Adani Ports and Special Economic Zone Ltd.ADANIPORTS
Aditya Birla Nuvo Ltd.ABIRLANUVO
Ambuja Cements Ltd.AMBUJACEM
Apollo Hospitals Enterprises Ltd.APOLLOHOSP
Asian Paints Ltd.ASIANPAINT
Axis Bank Ltd.AXISBANK
Bajaj Auto Ltd.BAJAJ-AUTO
Bajaj Finserv Ltd.BAJAJFINSV
Bajaj Holdings & Investment Ltd.BAJAJHLDNG
Bank of BarodaBANKBARODA
Bank of IndiaBANKINDIA
Bharat Forge Ltd.BHARATFORG
Bharat Heavy Electricals Ltd.BHEL
Bharat Petroleum Corporation Ltd.BPCL
Bharti Airtel Ltd.BHARTIARTL
Bosch Ltd.BOSCHLTD
Cairn India Ltd.CAIRN
Canara BankCANBK
Cipla Ltd.CIPLA
Coal India Ltd.COALINDIA
Colgate Palmolive (India) Ltd.COLPAL
Container Corporation of India Ltd.CONCOR
Crompton Greaves Ltd.CROMPGREAV
Cummins India Ltd.CUMMINSIND
DLF Ltd.DLF
Dabur India Ltd.DABUR
Divi’s Laboratories Ltd.DIVISLAB
Dr. Reddy’s Laboratories Ltd.DRREDDY
Exide Industries Ltd.EXIDEIND
Federal Bank Ltd.FEDERALBNK
GAIL (India) Ltd.GAIL
GlaxoSmithkline Consumer Healthcare Ltd.GSKCONS
Glaxosmithkline Pharmaceuticals Ltd.GLAXO
Glenmark Pharmaceuticals Ltd.GLENMARK
Godrej Consumer Products Ltd.GODREJCP
Grasim Industries Ltd.GRASIM
HCL Technologies Ltd.HCLTECH
HDFC Bank Ltd.HDFCBANK
Hero MotoCorp Ltd.HEROMOTOCO
Hindalco Industries Ltd.HINDALCO
Hindustan Petroleum Corporation Ltd.HINDPETRO
Hindustan Unilever Ltd.HINDUNILVR
Housing Development Finance Corporation Ltd.HDFC
I T C Ltd.ITC
ICICI Bank Ltd.ICICIBANK
IDBI Bank Ltd.IDBI
IDFC Ltd.IDFC
Idea Cellular Ltd.IDEA
IndusInd Bank Ltd.INDUSINDBK
Infosys Ltd.INFY
JSW Steel Ltd.JSWSTEEL
Jaiprakash Associates Ltd.JPASSOCIAT
Jindal Steel & Power Ltd.JINDALSTEL
Kotak Mahindra Bank Ltd.KOTAKBANK
LIC Housing Finance Ltd.LICHSGFIN
Larsen & Toubro Ltd.LT
Lupin Ltd.LUPIN
Mahindra & Mahindra Financial Services Ltd.M&MFIN
Mahindra & Mahindra Ltd.M&M
Maruti Suzuki India Ltd.MARUTI
MphasiS Ltd.MPHASIS
NMDC Ltd.NMDC
NTPC Ltd.NTPC
Oil & Natural Gas Corporation Ltd.ONGC
Oil India Ltd.OIL
Oracle Financial Services Software Ltd.OFSS
Petronet LNG Ltd.PETRONET
Power Finance Corporation Ltd.PFC
Power Grid Corporation of India Ltd.POWERGRID
Punjab National BankPNB
Ranbaxy Laboratories Ltd.RANBAXY
Reliance Capital Ltd.RELCAPITAL
Reliance Communications Ltd.RCOM
Reliance Industries Ltd.RELIANCE
Reliance Power Ltd.RPOWER
Rural Electrification Corporation Ltd.RECLTD
Sesa Sterlite Ltd.SSLT
Shriram Transport Finance Co. Ltd.SRTRANSFIN
Siemens Ltd.SIEMENS
State Bank of IndiaSBIN
Steel Authority of India Ltd.SAIL
Sun Pharmaceutical Industries Ltd.SUNPHARMA
Tata Chemicals Ltd.TATACHEM
Tata Consultancy Services Ltd.TCS
Tata Global Beverages Ltd.TATAGLOBAL
Tata Motors Ltd.TATAMOTORS
Tata Power Co. Ltd.TATAPOWER
Tata Steel Ltd.TATASTEEL
Tech Mahindra Ltd.TECHM
Titan Company Ltd.TITAN
UPL Ltd.UPL
UltraTech Cement Ltd.ULTRACEMCO
Union Bank of IndiaUNIONBANK
United Breweries Ltd.UBL
United Spirits Ltd.MCDOWELL-N
Wipro Ltd.WIPRO
Yes Bank Ltd.YESBANK
Zee Entertainment Enterprises Ltd.ZEEL

source: nseindia.com (as on feb, 2014)

Maharatnas

  1. BHARAT HEAVY ELECTRICALS LTD.
  2. COAL INDIA LTD.
  3. GAIL (INDIA) LTD.
  4. INDIAN OIL CORP.LTD.
  5. NTPC LTD.
  6. OIL & NATURAL GAS CORP.LTD.
  7. STEEL AUTHORITY OF INDIA LTD.

 

Navratnas

  1. BHARAT ELECTRONICS LTD.
  2. BHARAT PETROLEUM CORP.LTD.
  3. HINDUSTAN AERONAUTICS LTD.
  4. HINDUSTAN PETROLEUM CORP.LTD.
  5. MAHANAGAR TELEPHONE NIGAM LTD.
  6. NATIONAL ALUMINIUM CO.LTD.
  7. NEYVELI LIGNITE CORP.LTD.
  8. NMDC LTD.
  9. OIL INDIA LTD.
  10. POWER FINANCE CORP.LTD.
  11. POWER GRID CORP.OF INDIA LTD.
  12. RASHTRIYA ISPAT NIGAM LTD.
  13. RURAL ELECTRIFICATION CORP.LTD.
  14. SHIPPING CORP.OF INDIA LTD.,THE

Miniratnas

Category I

  1. AIRPORTS AUTHORITY OF INDIA
  2. ANTRIX CORP.LTD.
  3. BALMER LAWRIE & CO.LTD.
  4. BEML LTD.
  5. BHARAT DYNAMICS LTD.
  6. BHARAT SANCHAR NIGAM LTD.
  7. BRIDGE & ROOF CO.(INDIA) LTD.
  8. CENTRAL COALFIELDS LTD.
  9. CENTRAL WAREHOUSING CORP.
  10. CHENNAI PETROLEUM CORP.LTD.
  11. COCHIN SHIPYARD LTD.
  12. CONTAINER CORP.OF INDIA LTD.
  13. DREDGING CORP.OF INDIA LTD.
  14. ENGINEERS INDIA LTD.
  15. ENNORE PORT LTD.
  16. GARDEN REACH SHIPBUILDERS & ENGINEERS LTD.
  17. GOA SHIPYARD LTD.
  18. HINDUSTAN COPPER LTD.
  19. HINDUSTAN NEWSPRINT LTD.
  20. HINDUSTAN PAPER CORP.LTD.
  21. HLL LIFECARE LTD.
  22. HOUSING & URBAN DEVELOPMENT CORP.LTD.
  23. INDIA TOURISM DEVELOPMENT CORP.LTD.
  24. INDIAN RAILWAY CATERING & TOURISM CORP.LTD.
  25. IRCON INTERNATIONAL LTD.
  26. KIOCL LTD.
  27. MAHANADI COALFIELDS LTD.
  28. MANGALORE REFINERY & PETROCHEMICALS LTD.
  29. MAZAGON DOCK LTD.
  30. MISHRA DHATU NIGAM LTD.
  31. MMTC LTD.
  32. MOIL LTD.
  33. MSTC LTD.
  34. NATIONAL FERTILIZERS LTD.
  35. NATIONAL SEEDS CORP.LTD.
  36. NHPC LTD.
  37. NORTH EASTERN ELECTRIC POWER CORP.LTD.,THE
  38. NORTHERN COALFIELDS LTD.
  39. NUMALIGARH REFINERY LTD.
  40. ONGC VIDESH LTD.
  41. PAWAN HANS HELICOPTERS LTD.
  42. PROJECTS & DEVELOPMENT INDIA LTD.
  43. RAILTEL CORP.OF INDIA LTD.
  44. RASHTRIYA CHEMICALS & FERTILIZERS LTD.
  45. RITES LTD.
  46. SECURITY PRINTING & MINTING CORP.INDIA LTD.
  47. SJVN LTD.
  48. SOUTH EASTERN COALFIELDS LTD.
  49. STATE TRADING CORP.OF INDIA LTD.,THE
  50. TELECOMMUNICATIONS CONSULTANTS INDIA LTD.
  51. THDC INDIA LTD.
  52. WAPCOS LTD.
  53. WESTERN COALFIELDS LTD.

Category II

  1. BHARAT PUMPS & COMPRESSORS LTD.
  2. BROADCAST ENGINEERING CONSULTANTS INDIA LTD.
  3. CENTRAL MINE PLANNING & DESIGN INSTITUTE LTD.
  4. EDCIL (INDIA) LTD.
  5. ENGINEERING PROJECTS (INDIA) LTD.
  6. FCI ARAVALI GYPSUM & MINERALS INDIA LTD.
  7. FERRO SCRAP NIGAM LTD.
  8. HMT (INTERNATIONAL) LTD.
  9. HSCC (INDIA) LTD.
  10. INDIA TRADE PROMOTION ORGANISATION
  11. INDIAN MEDICINES PHARMACEUTICAL CORP.LTD.
  12. MECON LTD.
  13. MINERAL EXPLORATION CORP.LTD.
  14. NATIONAL FILM DEVELOPMENT CORP.LTD.
  15. NATIONAL SMALL INDUSTRIES CORP.LTD.,THE
  16. PEC LTD.
  17. RAJASTHAN ELECTRONICS & INSTRUMENTS LTD.

Source: Department of Public Enterprises (as on Oct, 2013)

 

MUTUAL FUNDS:

You can pick any of the following mutual funds and ETFs currently available for investment cum tax saving purpose.

 

Mutual Fund / ETF

Minimum Investment

Birla SL Focused Equity Ser 1 Direct

5000

Birla SL Focused Equity Ser 1 Reg

5000

Birla SL Nifty ETF

5000

Birla SL RGESS Series 1 Direct

5000

Birla SL RGESS Series 1 Reg

5000

DSPBR RGESS Series 1 Direct

5000

DSPBR RGESS Series 1 Reg

5000

Goldman Sachs Banking BeES

10000

Goldman Sachs CNX Nifty Shariah BeES

10000

Goldman Sachs Nifty BeES

10000

Goldman Sachs Nifty Junior BeES

10000

HDFC RGESS Series 1 Direct

5000

HDFC RGESS Series 1 Reg

5000

HDFC RGESS Series 2 Direct

5000

HDFC RGESS Series 2 Reg

5000

ICICI Pru CNX 100 ETF

5000

ICICI Pru Equity Savings Series 1 Direct

5000

ICICI Pru Equity Savings Series 1 Reg

5000

ICICI Pru Nifty ETF

5000

IDBI RGESS Series 1 Plan A Direct

5000

IDBI RGESS Series 1 Plan A Reg

5000

IIFL Nifty ETF

5000

Kotak Nifty ETF

5000

Kotak Sensex ETF

10000

LIC Nomura MF RGESS Series 1 Direct

5000

LIC Nomura MF RGESS Series 1 Reg

5000

Motilal Oswal MOSt Shares M50 ETF

10000

Quantum Index

5000

Reliance Shares Banking ETF

5000

Reliance Shares Nifty ETF

5000

Religare Invesco Nifty ETF

5000

SBI Sensex ETF

5000

UTI RGESS Direct

5000

UTI RGESS Retail

5000

 

Eligibility:

You’re eligible if

  • Demat Account not opened. If opened but not transacted in equity or F&O, derivatives before November 23, 2012.
  • Resident Individual
  • Gross total annual Income less than Rs.10 Rs.12 lakh.

The tax deduction under RGESS shall be available to a new retail investor whose gross total income for the financial year (1 April to 31 March) in which the investment is made under the Scheme is less than or equal to 10 12 lakh rupees.

A new retail investor is defined as follows:

  • Any resident Individual who has not opened a demat account and has not made any transactions in the equity or derivative segment as on the date of notification of the scheme i.e., November 23, 2012. OR
  • Any resident Individual who has opened a demat account as a first holder, but has not transacted in the equity or derivate segment till November 23, 2012. OR
  • Any resident Individual who has a demat account as a joint holder.

Eligible securities:

  1. Equity Shares in BSE-100 or CNX 100
  2. Equity Shares of Maharatna, Navratna, Miniratna
  3. Units of eligible ETFs or MFs
  4. Eligible FPOs & NFOs
  5. IPOs of eligible PSUs

List of eligible securities will be made available on the website of the stock exchanges (NSE, BSE).

The security should be RGESS eligible at the time of investment. Such security will be considered for RGESS investment, even if it becomes ineligible at a later date.

If an investor does not comply with the RGESS guidelines, the deduction shall be reversed, and will be considered the income of the assessee and liable to taxation.

The costs like  brokerage charges, securities transaction tax, stamp duty and service tax shall not be included while considering investments of up to Rs 50,000.

 

Lock-in Period

The eligible securities brought into the demat account will be automatically locked-in from the date of investment till one year from the date of last purchase of RGESS eligible securities. This period is called ‘Fixed Lock-in’ during which you cannot pledge or sell these securities.

  • Holding Period = 3 Years
  • Fixed lock-in Period = 1 Year from the date of credit
  • Flexible lock-in Period = 2 Years from the end of Fixed lock in period

During subsequent two years called as Flexible Lock-in, you can sell and buy RGESS securities. However, you will have to maintain the value of RGESS investment for cumulative period of 270 days during each of these two years.

Example:

Let us say, you have purchased eligible securities worth Rs. 50,000 in a RGESS designated demat account on December 31, 2012. The eligible securities will be in ‘Fixed lock-in’ till December 30, 2013 and for flexible lock-in till December 30, 2015.

In case you do not wish to claim tax deduction on a security, then a declaration in the prescribed format (Form B) should be submitted within one month from the date of credit to the DP.

Your demat account that was designated for RGESS will be converted into a regular or ordinary demat account at the end of the flexible lock-in period.

 

DEMAT Account

In order to open DEMAT account for RGESS make sure the investor:

  • does not have any other demat account as a first holder in CDSL OR
  • has opened a demat account (as a first holder) in CDSL and not had
  • any transactions in equity in the said account.
  • does not have any other demat account in CDSL with RGESS
  • is PAN compliant.

The retail investors are restricted to hold the securities only in “DEMAT” account provided by many Depository Participants (DPs) of CDSL. The list of DPs under CDSL can be found here.

In addition to KYC requirements like ID Proof, Address Proof, PAN Copy, you are also requested to provide a declaration form “Form A”, which you can get from the DP you’re applying to, in prescribed format for availing RGESS benefits. This declaration form will help you designate your new or existing demat account as RGESS.

In case the investor want to exclude any RGESS eligible scrip from his RGESS portfolio, he has to submit “Form B” within one month from the date of the credit in his demat account.

Please note you can have only one DEMAT account for the purpose of availing RGESS benefits.

After getting ready with your new DEMAT account or designation your existing DEMAT account as RGESS, you can approach any SEBI registered stock broker with your Demat Account Number and DP ID for investing in eligible securities.

 

RGESS vs PPF vs ELSS

We did a quick comparision of RGESS with the top tax saving schemes available in India and the result is:-

RGESSELSSPPF
EligibilityAnnual Income less than Rs.10 Rs.12 LakhsNoneNone
Lock-in Period1+23 years15 Years
Tax Benefits50% (80 CCG)100% (80 C)100% (80 C)
Maximum Investment for DeductionRs.50,000Rs.100,000Rs.100,000
Minimum InvestmentN/ARs.500 to Rs.5000Rs.500
Need for DEMATYesNoNo
Equity LinkedYesYesNo
Annual ReturnMarket BasedMarket Based8.8%
Interest EarnedNon TaxableNon TaxableNon Taxable
RiskMedium to HighMedium to HighLow

Note: You need a PAN Card, Bank Account or optionally DEMAT account for equity linked schemes with all the schemes compared above.

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