Monday, September 16, 2013

Get Tax Saving benefit on Mutual Fund investement :Rajiv Gandhi Equity Savings Scheme (RGESS)

An Indian resident,  who earn less than Rs 10 lakh a year and have not done any equity transactions before 23 November 2012, then you are eligible for investing under the Rajiv Gandhi Equity Savings Scheme (RGESS).
Under this scheme, first-time equity investors can invest up to Rs 50,000 in approved stocks and mutual funds and claim income tax deduction on 50 per cent of the amount under Section 80 CCG of the Income Tax Act. This is over and above the Rs 1 lakh limit under Section 80 C.
To be eligible for investment under this scheme, you must open a demat account and designate the demat account for RGESS by submitting the duly signed 'Form A', which is available with brokerage houses.
You can invest in any of the eligible mutual funds or stocks in lump sum or in installments during the year in which the deduction is to be claimed. Though any amount can be invested through the demat account, tax benefit will be available only on an investment of up to Rs 50,000.

The investments under the scheme would automatically be subject to lock-in during the first year. From second year onwards, you can sell the units of securities if you maintain the minimum amount for which you have claimed income tax benefit. Failing to do so will lead to reversal of the tax benefit availed.

The tax benefit under RGESS is available only for one year. If an investor has claimed a deduction once, he will not be allowed any deduction under the scheme in subsequent years.

One can invest in non-RGESS stocks and mutual funds through the same demat account and those investments would not be subject to conditions such as the lock-in of the scheme.

If you invest on the last trading day of the financial year, you get a three-day grace period so that the securities get credited in the demat account and you can avail tax benefit under the scheme.

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