Fwd: Rajiv Gandhi Equity Scheme

Rajiv Gandhi Equity Saving Scheme
 
Background :
 
The Rajiv Gandhi Equity Savings Scheme is a new equity tax advantage savings scheme for equity investors in India. In the last Union Budget 2012-13, a new section 80 CCG has been introduced in the IT Act for extension of income tax benefits under the Rajiv Gandhi Equity Savings Scheme (RGESS) The scheme offers tax benefit over and above the tax benefit offered under Section 80 C of the IT Act which is available for savings/investment up to Rs 1
lakh. The investment has to be made in eligible Equity shares and/ or eligible Equity
Mutual Funds.
 
The benefit is available to first time investors, for investment through their demat accounts opened on or after November 23, 2012, or demat accounts which have not yet been used for equity investment. Investment made up to Rs 50,000/- qualify for tax benefit under the scheme. A maximum of 50% of the invested amount, i.e. up to Rs 25,000/- will be deducted from the taxable income. The actual tax saving would depend on the applicable income tax slab of the investor.
 
FAQs :
 
1. What is Rajiv Gandhi Equity Saving Scheme 2012 (RGESS) and its       
    objective?
     A tax-saving scheme launched by the Government of India in the last Union Budget 2012-
    13. The motive behind it is to attract retail investors into the equity loop. The Scheme also
    aims to encourage the savings of the small investors in domestic capital market.
 
2. Under which section of IT Act 1961, the income tax rebate is allowed for
    RGESS ?
    Income tax rebate is allowed for RGESS under 80CCG of IT act 1961.
   
3. What is the income tax benefit allowed?
    Individual income tax assesses having gross total annual income less than or equal to Rs.
    10 lakhs are allowed deduction in the computation of total income of 50% of total amount
    invested in RGESS eligible securities subject to a maximum deduction of Rs.25, 000. The
    maximum investment eligible for the purpose of deduction under Section 80CCG is Rs.     
    50,000.
 
 
4 What is the difference between benefit u/s 80C & benefit u/s 80CCG under IT
   Act 1961?
   Section 80C and section 80CCG are separate sections of IT Act 1961. Section 80CCG is
  created for providing tax benefits to the investors investing exclusively in RGESS eligible
  securities. The tax benefit for investment in RGESS u/s 80CCG is over and above of Rs. 1
  lakh  benefit currently available u/s 80C of IT Act 1961.
 
5.Who is eligible to get income tax benefits under Section 80CCG of IT Act
  1961?
  One is  eligible for income tax deduction benefits under Section 80CCG provided –
     i) He/She is a resident individual
   ii) He/She is  a new retail investor
  iii) His/Her gross total annual income does not exceed Rs.10 lacs
  iv) He/She has invested in RGESS eligible securities
   v)  His/Her investment is locked-in for the period of 3 years from the date of acquisition.
 
6. Who is a "New Retail Investor"?
   "New retail investor" is a resident individual:-
   (1)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 (23rd November 2012)
    or
   (2)who has opened a demat account before the date of notification of the Scheme
      (23rd November 2012) but has not made any transactions in the equity or the
     derivative segment thereafter.
   or
  (3) An individual who is not the first account holder of an existing joint demat account shall
       also be eligible to open a demat account for the purposes of this Scheme.
 
7. How to get confirmation for 'new retail investor' status?
    The depository will certify your new retail investor status at the time of designating your
    demat account as RGESS demat account.
 
8. What are "Eligible Securities" defined under the RGESS?
    Eligible securities as defined under RGESS are –
    i. Equity shares of companies representing "BSE-100" Index or "CNX- 100" Index including
       their Follow on Public offers (FPO)
   ii. Equity shares of Maharatna, Navratna or Miniratna public sector enterprises and their
      FPOs;
  iii. Units of Exchange Traded Funds (ETFs) or Mutual Fund (MF) schemes investing in RGESS
       eligible shares provided these units are listed and traded on stock exchange and settled
       through depository mechanism. New Fund Offers (NFOs) of these Schemes are also
       eligible.
  iv. Initial Public Offer(IPO) of a PSU wherein the government shareholding is at least 51%
      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;
 
9. Is there a maximum limit for investing in LICNMF RGESS Sr.1 ?
    There is no cap on the amount of investment in RGESS eligible securities. However,
    income tax deduction benefits under the Scheme will be available only for a maximum
    investment amount of Rs. 50,000. This deduction benefit is available only in the year of
    investment.
 
10. What is minimum eligible investment under RGESS Sr. 1 ?
      The  minimum investment is Rs. 5000/- and thereafter in multiples of Rs. 1
 
11. Will I get Tax deduction every year for investment in RGESS Sr.1?
       No. Tax benefits are allowed only in the first year of investments under RGESS. Even if
       one claims small amount deduction under RGESS in one year no further deductions can
       be claimed in subsequent years.
 
12. What is the mode of holding RGESS Sr.1 units ?
      (1) The unit holders are given an option to hold the Units by way of an account statement (physical form) or in dematerialized form (Demat).
      (2) Investors who wants to avail deduction under RGESS should hold units under Demat mode only.
      (3)Unit holders opting to hold the units in demat form must provide their Demat account details in the specified section of the application form.
 
13. What is Demat account?
       Demat account is an account where shares, debentures or units of mutual funds etc are
       held in electronic (paperless) form.
 
14. Where can I open a demat account?
      Demat account can be opened through any of the DPs linked to either the Central
      Depository Services (India) Limited (CDSL) or National Securities Depositories (NSDL)
 
15. What is the procedure for opening demat account for RGESS Sr.1?
      (1) To open a demat account you need to submit an account opening form along with           
            Form A defined under the RGESS notification and other necessary documents to the
            Depository Participant (DP).
     (2) Select Banks and Brokers offer DP services.
     (3) Permanent Account Number (PAN) is mandatory for opening the demat account.
     (4) You need to submit necessary documents required for KYC (Proof of Identity and
          Proof of Address).
 
16. What is a Form A under RGESS?
       Form A is a declaration to be submitted by the investors to DP for availing the benefits
       under the RGESS.
 
17.Can I use my existing Demat account for investments under
     RGESS Series 1 ?
    Yes, you can designate your existing demat account as RGESS designated demat account
    provided you have not made any equity or derivative transactions till the date of
    notification of the scheme. You need to submit Form A to Depository Participant (DP)
    and also need to furnish PAN for designating existing demat account as RGESS eligible
    account.
 
 
19. Is there any lock-in period for RGESS investments?
       Yes, Investments made in RGESS are subject to the two types of lock-in periods  
       occurring one after the other - Fixed lock-in and Flexible lock in.
 
 20. What is Fixed lock-in period under RGESS?
      The fixed lock-in period is the period which will commence from the date of purchase of
      RGESS units in the relevant financial year. The fixed lock-in period is for a one-year    
      period from the date of purchase of the units. In case where multiple transactions   
      (purchases during different dates in the same financial year), the lock-in period will end
      one year from the date purchase of the last tranche of RGESS eligible securities (in the
      same financial year) on which deduction is claimed under the Scheme.
 
21. What is 'Flexible Lock-in' period?
      The period of 2 years beginning immediately commencing after the end of fixed lock-in
      period.
 
22.Can I buy RGESS Eligible securities without complying with the criteria of
     lock-in period?
     To avail tax benefit under section 80CCG of IT Act 1961, the eligible securities brought
     into the demat account will be automatically locked-in (fixed and Flexible lock-in) for 3
     years. However, if you do not want certain securities (including RGESS eligible securities)
     credited to your RGESS demat account to be considered for the Sec 80CCG benefits,
     then a declaration in the prescribed format (Form B) should be submitted within one
    month from the date of credit to the DP. In this case deduction under section 80CCG of
    IT Act 1961 is not allowed for investment in the eligible securities.
 
23.Can I lose the Tax benefits availed under section 80CCG of IT Act 1961?
    Yes, you will lose tax benefits availed under section 80CCG of IT Act 1961, if you fail to
    comply with lock in period requirement or any other requirement of the scheme
    (including maintaining the amount of investment for which tax benefit is claimed under
     Sec 80CCG duly factoring in fall in market value).
 
24.What will be the consequences if I fail to comply with the requirement of
      RGESS?
      If you fail to comply with the requirement of RGESS, then the deduction already availed
      under section 80CCG will be treated as your total taxable income and you are liable to
     pay tax as per the provisions of Income Tax Act, 1961.
 
25. Where can I get information regarding my transactions in RGESS Demat  
      account?
      The depository participant (DP) will provide an annual statement of the eligible
      securities invested in or traded through the demat account
 
Courtesy : Wellwisher
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