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With an objective to encourage flow of savings of the small investors in domestic capital market, the Government of India (GOI) announced a scheme named Rajiv Gandhi Equity Savings Scheme, 2012 (RGESS) in the Union Budget 2012-13 and further expanded vide Union Budget 2013-14 (Notification dated December 18, 2013) to offer tax benefits to ‘New Retail Investors’.

A ‘New Retail Investors’ is one :

• • who is a resident individual (the benefit cannot be availed by HUF, corporate entities / trusts etc)
  • who has not opened a Demat account and has also not done any trading in the derivative segment till RGESS account opening date or the first day of the “initial year” in which he brings in the RGESS eligible investment into the account, whichever is later.
  • who has opened a Demat account and has not made any transactions in equity and /or in the derivative segment till designating such account as RGESS or the first day of the “initial year” in which he brings in the RGESS eligible investment into the account, whichever is later..

Provided that an 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 and will be considered as new retail investors for the purpose of opening of a fresh RGESS account, if otherwise eligible;

Initial Year means -

• • the financial year in which the investor designates his demat account as Rajiv Gandhi Equity Savings Scheme account and makes investment in the eligible securities for availing deduction under the Scheme; or
  • the financial year in which the investor makes investment in eligible securities for availing deduction under the Scheme for the first time, if the investor does not make any investment in eligible securities in the financial year in which the account is so designated;

Under RGESS, ’New retail Investor‚ can invest upto Rs.50,000 in eligible securities and avail additional tax benefit (i.e., deduction) upto Rs.25,000 under Section 80CCG. This is over and above the limit of Rs.1,00,000 currently available under Section 80C of the Income Tax Act, 1961.

The Scheme is open for all New Retail Investors who have gross total income less than or equal to Rs. 12 lakh.

You can invest in eligible securities. Eligible securities considered for RGESS investment are:

• Equity shares of selected companies which include:
  • Companies falling in the list of ‘CNX-100’ of NSE or ‘BSE-100’.
  • Public sector enterprises categorized as Maharatna, Navratna or Miniratna by the Central Government.
  • FPOs of above mentioned RGESS compliant companies.
• Units of Mutual Fund (MF) schemes which are RGESS compliant.
• Units of Exchange Traded Funds (ETFs) which are RGESS compliant.
• NFOs of above mentioned RGESS compliant funds.
• IPOs of PSUs which are scheduled to get listed in the relevant financial year with RGESS elgibile criteria(Refer FAQs)

Click here to view List of RGESS eligible stocks / ETFs / MF schemes

• • Lock-in period under RGESS is of three years which includes ‘Fixed Lock-in’ period of one year and ‘Flexible lock-in’ period of two years.
  • Lock-In period shall commence from the date of purchase of such securities in the relevant financial year and end on the 31st day of March of the year immediately following the relevant financial year.
  • Flexible lock-in period of two years shall commence immediately after the end of the fixed lock-in period
  • During ‘Fixed Lock-in’ period, eligible securities cannot be sold / pledged. During ‘Flexible lock-in’ period, eligible securities can be sold / pledged subject to certain conditions.
  • The designated RGESS demat account will be converted into a regular or ordinary demat account at the end of the flexible lock-in period(s).

RGESS benefits can be availed for three consecutive financial years, beginning with the financial year in which the investment under the Scheme was made for the first time by the investor.

• • Open a new demat account with any DP of NSDL.
  • If you already have a demat account and you are eligible, designate your demat account under RGESS.
  • To designate your demat account under RGESS, submit a declaration in Form A to your DP.
  • Start investing.

• Secondary Market:
  • Approach any SEBI registered Stock Broker of your choice.
• Mutual Funds:
  • Approach any Mutual Fund distributor or a SEBI registered Stock Broker. Ensure to provide your demat account details i.e., Demat Account Number and DP ID.
• IPO / NFO of RGESS compliant companies/funds:
  • Investor must ensure to mention demat account details i.e., Demat Account Number and DP ID in the IPO / NFO application form.