How to save more tax using RGESS(Rajiv Gandhi Equity Savings Scheme)


Great news for salaried professionals….

Everyone knows that only 1 lakh INR is exempted from tax over and above the fixed slab.Now Rajiv Gandhi Equity Savings Scheme(RGESS) brings cheers to investor.

RGESS serves the dual purpose for investor,it allows investor to gain from stock market at the same time,it allows to save tax on income by investing.A new section 80CCG has been introduced to allow tax deduction of 50% on a maximum investment of INR50000.

But be aware that this benefit is only for investor with annual income of  INR 10 lakhs.The best part is that, this tax benefit is over and above the existing exemption of INR 1lakh under section 80C.

Under RGESS,Investors can invest in both type of fund whether it is primary or secondary which may be part of BSE100,CNX100,PSU’s categorized as Maharatna,Navratna,miniratna and exchange traded funds(ETFs) linked to eligible securities.For investing in mutual fund there are many schemes which have been specially approved by sebi under RGESS.

What is required from investor perspective?

As an investor you need to submit a declaration in form A to your demat opening company.

Noticeable point:-

1.Lock in period is of 3 years for RGESS.

2.During first year which is called fixed lock in,you can not pledge or sell the shares purchased.

3.In the next 2 year which is also known as flexible period,you can buy and sell securities or ETFs,maintaining the value of investment originally made for a period of 270 days in next 2 year.

4.You are eligible to invest in RGESS if you have not traded in equity before November end 2012.

5.Under RGESS you can invest in equity as well mutual fund.

Now lets know how much exactly you are saving?

1.Investor can save income upto INR 5000,Investors with an annual income of 10lakhs come under 20% of tax slab.

2.50% of the maximum investment limit(INR 50,000) which comes to INR 25,000 can be exempted from tax deduction.

3.It means if you earn upto 10 lakhs,you have to invest INR 50,000 to get tax deduction on INR25,000(50% of 50,000) which amount to tax savings of  INR 5000.

Some of the mutual funds which come under RGESS are as follows:-

1.LIC Nomura Mutual Fund,

2.UTI Mutual Fund,

3.SBI Mutual Fund,

4.IDBI Mutual Fund 

5.DSP Black Rock

Always think of Equity market as a medium to build wealth over the long term.With the country prosperity ,equity market is bound to grow.If we compare with the world economy,india has a tax rate of as low as 15% on short-term capital gain,zero tax on long-term capital gains from stock market investments,tax is exempted from ELSS or Equity Linked mutual fund schemes and dividend payed to investors.

Government measures has brought capital through divestment in PSU and hence allowing inclusive growth and bringing more people to stock market.As of now only 4% of indian household savings are invested in stock market compared o 42% in USA and 14% in china.

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