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Rajiv Gandhi Equity Savings Scheme (RGESS)
If you are new to the equity markets, and don’t know where to start, fear not; you are at the right place. The Rajiv Gandhi Equity Savings Scheme (the RGESS) is an investment option that allows you to enjoy the benefits of equity investments along with tax exemptions up to Rs. 25,000.
All you will have to do is fill up ‘Form A’. You may also have to open a new trading and demat account. You can now start investing in ‘eligible’ securities.
Features of RGESS
Account opening fee:
You need not pay any account-opening fee if your margin at the time of opening the account is over Rs 50,000. But, if your margin is below Rs 50,000, Rs. 750 will be charged.
BROKERAGE STRUCTURE Delivery 0.49% Square off(Both Sides) 0.049% Futures(Both Sides) 0.049% Options Rs.100/- per lot or 1% on premium whichever is higher Minimum Brokerage 4 Paise for delivery and 3 paise for Intraday and Futures
This is the amount of time you are required to hold your assets. Under the RGESS, the holding period is three years.
Investors can choose between a lock-in period of 1 year or 2 years. This means, you will not be able to sell your holdings during the fixed lock-in period.
Investors can only realize tax benefits on investments up to Rs. 50,000. More can be invested under the scheme, but they will not be eligible for tax exemptions.
Advantages of RGESS
The key advantage of the RGESS is that it offers tax benefits. However, the tax advantages are different than those offered by other securities.
- An investor is eligible to avail tax exemptions up to Rs. 25,000 per year. This is over and above the Rs. 1 lakh allowed under Section 80C of the Income Tax Act.
- You can enjoy tax benefits for three consecutive years by investing Rs. 50,000 every year.
- Unlike other tax-saving instruments, profits can be realized after a year. Investors can choose the option of a ‘flexible lock-in period’ of two years. This allows you to sell your assets in the first year. However, you will have to submit a filled-up ‘Form B’ for the same within 30 days of the transaction.
- There are no charges for operating your demat account in the first year. After one year, standard demat charges will be applied.
- You need not invest all your money in lump-sum. Investments can be spread throughout the year through installments.
- Safe equity trading
- Less volatility due to lock-in period
- Save taxes
Read about RGESS
+ Expand AllFrequently Asked Questions (FAQs)
Q Who can open RGESS account?A
New retail investors are eligible to open the account. You will be considered as a 'New Retail Investor':
- If your annual income is less than or equal to Rs. 12,00,000
- If you have never traded in equities or derivatives
- If you have never opened a demat account
- If you are an existing account holder, but have not made any transaction in the equity or derivatives segment
Q Which securities are considered as 'eligible securities'?A
You can only buy and sell certain securities under the scheme to be eligible for tax exemption. These are:
- Stocks that are part of 'CNX-100' (by NSE) or 'BSE-100' (by BSE)
- Equity shares of public-sector enterprises that are categorized as Maharatna, Navratna or Miniratna
- Units of Exchange-Traded Funds (ETFs)* or Mutual Fund schemes*
*List of Mutual Fund Schemes and ETFs would be declared on an ongoing basis as and when the notification of the fund or ETF's eligibility is received.
Q Will I be able to sell securities within the holding period?A
Yes. In the first year, when the 'Fixed lock-in period' is applicable, you will be allowed to sell your shares if you submit ‘Form B’. Make sure you submit this within 30 days of the transaction. If you do not submit the form, the shares would be automatically locked for a period of one year as per the scheme policy.
If you have submitted the form and opted for the ‘Flexible lock-in period’, then the shares will be locked only from the second year.
Q If I already possess some physical shares, will I be eligible under RGESS?A
Yes. Since these are physical shares, and are not in an electronic form stored in a demat account, you will be considered a new investor. However, you will have to purchase new shares under the scheme to avail its benefits. Simply converting the shares into a dematerialized form will not count.
Q I own units of some ETFs and mutual funds. Can I apply for RGESS?A
Yes. Only investing in stocks in dematerialized format will cancel your eligibility. Investments in mutual funds and exchange-traded funds (ETFs) will not be considered. However, once you open an account, you will have to invest in new assets to avail the scheme’s tax benefits.
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