Rajiv Gandhi Equity Savings Scheme or / RGESS is
a new equity tax advantage savings scheme for equity investors in India, with
the stated objective of "encouraging the savings of the small investors in
the domestic capital markets.".
First time retail investors in shares
It was approved by The Union Finance Minister,
Mr. P. Chidambaram on September 21, 2012. It is exclusively for the first time
retail investors in securities / share market. This Scheme would give income
tax benefits to new investors who invest up to Rs. 50,000 and whose annual
income is below Rs. 12 lakh.
In 2013-14, the income ceiling of the
beneficiaries was raised to Rs. 12 lakh from Rs. 10 lakh specified in 2012-13.
The Scheme not only encourages the flow of
savings and improves the depth of domestic capital markets, but also aims to
promote an 'equity culture' in India. This is also expected to widen the retail
investor base in the Indian securities markets.
The investor would get 50% deduction of the
amount invested during the year, upto a maximum investment of Rs.50,000 per
financial year, from his / her taxable income for that year, for three
consecutive assessment years.
* 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
installments in the year in which the tax claims are filed.
* The
benefits can be availed for three (3) consecutive years.
* Dividend
payments are tax free.
* RGESS
scheme has a long run benefit of educating the retail investment segment and
thereby moving towards financial inclusivity in India.
Success of this scheme can lead to transfer of
assets from traditional savings instruments like bank deposits and FDs to the
capital markets, leading to diversification in retail investor portfolio and
also leading to more productive "capital formation" assets.
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