This section is inserted by Finance Act,2012 and is applicable from Assessment Year 2013-14.
Eligible Assesee – Resident Individual who is a new retail investor whose Gross Total Income does not exceed Rs. 12 lakhs
Amount eligible for deduction – Amount invested in listed equity shares or listed units of an equity oriented mutual fund in accordance with the scheme
Deduction under this section is allowed for three consecutive years starting from the year in which the listed equity shares or listed units of equity oriented funds were first acquired.
Amount of deduction is lower of the following:
- Rs. 25,000
- 50% of the amount invested in such equity shares
Conditions for deductions:
- The assesssee is a new retail investor as may be specified in the scheme
- The investment is made in such listed equity shares as may be specified in the scheme
- The investment is locked in for a period of three years from the date of acquisition in accordance with the scheme
- Other conditions as specified
Withdrawal of deduction – If the assesse fails to comply with any of the conditions specified in any year, then the amount so allowed as deduction is taxable in such year.
(Notification no. 51/2012)The scheme notified by the Central Government in this behalf is known as Rajiv Gandhi Equity Saving Scheme (RGESS) and is as under:
- Who is New Retail Investor?
- Eligible Securities
- Procedure at time of opening of demat account
- Procedure for investment under scheme
- Period of holding requirements
Who is New Retail Investor?
(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
Eligible Securities
(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 (RGESS) eligible securities as underlying, as mentioned in sub-clause (a) or (b) 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 (a) or (b) above;
(e) New Fund Offers (NFOs) of sub-clause (c) 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;
Procedure at time of opening of 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(Broker)
(c) the new retail investor shall furnish his Permanent Account Number (PAN)
Procedure for investment under scheme
A new retail investor shall make investments under the Scheme in the following manner :-
(a) Investment can be made in one or more installments
(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 subsection (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.
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.
