Rajiv Gandhi Equity Saving Scheme (RGESS) was announced in the 2012-13 budget by the Finance Minister of India for the benefit of first time equity investors in India. Although the scheme is meant specially for individuals who have never invested in stocks.
The Scheme is drafted to promote the saving culture and improves the liquidity in Indian capital markets. Another major objective is to popularize an ‘equity culture’ in the country. The scheme is likely to increase the investor base especially retail in the Indian capital markets.
Highlights of RGESS scheme.
- The maximum Investment permissible under the Scheme is Rs. 50,000 and the investor would get a 50% deduction of the amount invested from the taxable income for that year.
- It provides additional tax benefits over and above the present tax savings schemes under the Income Tax Act.
- Gains, arising of investments in RGESS, can be realized after a year. This is in contrast to all other tax saving instruments.
- Investments are allowed to be made in instalments in the year in which the tax claims are filed.
- Dividend payments are tax free.
- This scheme has a long run benefit of educating the retail investment segment and thereby moving towards financial inclusivity in the country.
Success of this scheme can lead to huge retail participation in equity markets leading to transfer of assets from traditional savings instruments such as bank deposits and FDs to the capital markets. Also it will lead to diversification in retail investor portfolio and also leading to more productive “capital formation” assets.
