Rajiv Gandhi Equity Scheme: A newer mode to save tax

Posted on : Monday, December 30, 2013

Looking for investments in shares? Why not save taxes while investing.

A newer mode to save tax

As the Indian economy slides into recession, silver and gold are losing, property rates are also going down, and the investor lies abandoned with all the money lying idle in his locker!

If you are also stuck up in your investment decision then may be Budget 2013 has a solution for you: Rajiv Gandhi Equity Scheme.

The much talked about Rajiv Gandhi Equity Scheme (RGES) was introduced in Finance Bill 2012. It has made a comeback in Finance Bill 2013 with a BANG!!

Eligibility for claiming deduction under Rajiv Gandhi Equity Scheme

According to the Finance Bill 2013 an investor can invest in Rajiv Gandhi Equity scheme and claim deduction of 50% of amount invested therein. There are certain conditions for claiming this deduction which are as follows:

1. The investor should be a new retail investor, i.e. he should not have invested in shares, mutual funds or derivatives prior to 23.11.2012.
2. The Gross Total Income of the investor should not be more than Rs. 12 lacs. (For financial year 2012-2013 the limit of GTI was Rs.10.00 lacs.)
3. The deduction under this scheme cannot exceed Rs. 25,000/-
4. There is a lock in period of 3 Years that is the investor cannot sell off the securities for the next 3 years after claiming this deduction.
5. The benefit of this scheme has been extended by Finance Bill 2013 from just 1 financial year (2012-2013) to 3 consecutive financial years (2012-2013 to 2014-2015). Now an investor can invest in RGES in each of three financial years and claim deduction
6. Through Rajiv Gandhi Equity Scheme you can invest in any of the following securities.
   • Equity shares of listed companies
   • Equity shares of Public Sector Undertakings (PSUs)
   • Mutual Funds of above two mentioned companies / PSUs
   • IPO of Public Sector Undertakings

Examples

1. If your gross total income for financial year 2013-2014 is 14.00 lacs and you invest in Rajiv Gandhi Equity Scheme then you cannot claim deduction under this scheme because your income is more than Rs. 12 lacs.
2. If you have invested Rs. 2,50,000 in Rajiv Gandhi Equity Scheme then, you cannot claim 50% of Rs. 2,50,000 i.e. Rs. 1,25,000, but Rs. 25,000 considering the limit.